A foster child is a child placed in your care by a licensed agency or court, and eligible foster children may qualify you for valuable tax benefits.
Understanding What “Foster Child” Means for Taxes
In everyday life, a foster child is a child who has been placed into your home temporarily or long-term by an authorized placement agency or through a court order. For tax purposes, the IRS uses this same definition. The key point is that the placement must be official — meaning it comes from a recognized agency or the court system, not through informal family arrangements.
Even though a foster child is not your biological or adopted child, the IRS recognizes them as part of your household for certain tax benefits when specific requirements are met. This can make a meaningful difference in your overall tax situation.
Why Foster Children Matter in Tax Rules
The IRS allows taxpayers to claim a foster child as a qualifying child for several tax credits and exclusions. Because raising a child — foster or otherwise — includes financial responsibility, tax benefits help offset some of the costs.
A foster child may help you qualify for:
- The Child Tax Credit
- The Earned Income Credit (EIC)
- The Child and Dependent Care Credit
- Head of Household filing status
- Dependent exemption rules (in years when exemptions apply)
These benefits can reduce the amount of tax you owe or even increase your refund.
Requirements for a Child to Qualify
Not every foster child automatically qualifies for tax benefits. The IRS has clear rules to ensure the child genuinely lives with and is supported by the taxpayer.
Official placement
The child must be placed with you by:
- A state or local government agency
- A licensed foster agency
- A court order
Informal arrangements, such as taking care of a relative’s child without formal documentation, do not meet the IRS definition of a foster child.
Residency test
Generally, the child must live with you for more than half the tax year. There are exceptions for temporary absences, such as school, medical care, or vacation.
Support test
You must provide significant daily care, but the IRS does not require you to provide more than half of the child’s financial support to claim certain credits like the Earned Income Credit.
Age requirements
Most tax benefits require the foster child to be under age 19, or under age 24 if a full-time student. Children who are permanently disabled can qualify at any age.
Example of How This Works
Imagine Daniel and Mia are licensed foster parents. Early in the year, a court places a 10-year-old child in their home for foster care. The child lives with them for nine months of the year. Because the placement is official and the child lives with them for more than half the year, Daniel and Mia may treat the child as a qualifying foster child for tax purposes. This may allow them to claim the Child Tax Credit, the Earned Income Credit, and possibly Head of Household status if other requirements are met.
Common Misunderstandings
Many people assume that foster children must be financially supported entirely by the foster parent to qualify for tax benefits. In reality, many credits — such as the Earned Income Credit — only require that the child meet residency, age, and relationship criteria.
Another misconception is that foster parents must adopt the child to receive tax benefits. Adoption is not required. As long as placement is official and the other rules are met, the IRS treats foster children similarly to biological or adopted children for many tax purposes.
Final Thoughts
A foster child can provide meaningful tax benefits to the household caring for them, recognizing the emotional and financial commitment involved in fostering. If a child is officially placed with you and meets the IRS requirements for residency, age, and relationship, you may qualify for valuable tax credits and a more favorable filing status. Understanding these rules helps ensure you receive the support available to you while providing care to a child in need.
