A client has been acting as a foster parent and wanted to know the tax benefits for a US taxpayer and a state of Maine taxpayer for being a foster parent. He and his wife make approximately $180,000 and file jointly and have no other children.

ANSWER

The BIDaWIZ Team's Answer:

There are actually no specific tax credits for caring for foster children. However, the foster parents may claim the child as a dependent on their tax return (IRC Section 152). In addition, similar to parents that care for biological children, they are eligible for the child and dependent care credit -- for children under the age of 13 and for child-care.

In the instance that the foster parents cannot claim the child as a dependent, they may be eligible to deduct the cost of being a foster parent as a charitable contribution (Chief Counsel Advice (CCA) memoranda: 200007030). However, they must meet certain criteria:

1) You have no profit motive in providing foster care and are not, in fact, making a profit
2) A qualified organization must designate the individuals you take into your home for foster care

You can deduct expenses that meet both of the following requirements:
3) They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child
4) They must be mainly to benefit the qualified organization

References: IRC Section 152; (Chief Counsel Advice (CCA) memoranda: 200007030
State: Maine