||Ask the Dollar Diva
Can I claim my foster children
Dear Dollar Diva,
What are the tax rules relating to foster children? I have two foster
children who have lived with us for more than two years. We will
adopt the 8-year-old when the state gets everything lined up; the
16-year-old is long-term foster care until he is 18. Can we claim
the foster children as dependents?
Foster children as dependents
To claim a foster child as a dependent you have to
pass the following tests:
Relationship -- The child must have been
a member of your household for the entire year.
Citizen or resident -- The child must be
a U.S. citizen or resident alien, or a resident of Canada or
Support -- You must provide at least half
of the child's total support for the year.
The Diva doesn't have enough information to know if
you pass the support test, but she can help you figure it out. You
need to determine what it costs to support each child for the year
and where the money for the support came from.
Support includes the child's share of housing, food
and household expenses. It also includes the child's personal expenses,
such as clothing, education, medical care and recreation.
Where the support came from includes the amount others
-- such as state and welfare agencies -- provided, as well as the
amount you provided.
Go to IRS
Publication 501, Exemptions, Standard Deduction and Filing Information
to find a user-friendly worksheet that helps figure out what the
child's expenses were and whether you paid half.
The Diva assumes you are not in the trade or business
of providing foster care. If providing foster care is how you make
a living, you cannot claim your foster children as dependents.
Adopted children as dependents
When a child is placed with you for adoption by an
authorized agency at any time during the year, he is treated as
your biological child for tax purposes. He doesn't have to live
with you for the entire year to be claimed as a dependent, even
if he wasn't adopted until the following year.
However, to claim any child as a dependent, you still
have to pass the support test.
You may be able to claim a credit for adoption expenses
such as adoption fees, court costs, attorney fees and any other
reasonable and necessary adoption expenses. The credit is claimed
8839, Qualified Adoption Expenses, and attached to your Form
1040. For more information, see the instructions
to Form 8839.
Earned Income Tax Credit
If your earned income was less than $30,580, you may
be eligible for the earned income tax credit. The EITC is a special
credit for low-income working people, and it is a credit that is
often missed by eligible taxpayers. You do not have to pass the
support test for your foster children to be considered as qualifying
children for the EITC.
The IRS wants you to take it if you're entitled to
it and has dedicated a section of its Web site to giving plain-English
answers to taxpayers' questions about the EITC.