Do Foster Parents Make Money? A Financial Overview

Foster care payments are financial support designed to cover the expenses associated with caring for a foster child. The fundamental purpose of foster care is to offer a safe and nurturing environment for children who require out-of-home placement. This financial assistance helps ensure that foster parents can meet the needs of the children in their care without incurring significant personal financial burden.

The Nature of Foster Care Financial Support

Financial support for foster parents functions as a reimbursement or stipend, not as a salary or means of generating income. These payments are specifically allocated to offset the costs incurred while providing care for a foster child. Typical expenses covered by this support include essential needs such as food, clothing, and housing costs like utilities and furnishings. It generally contributes to personal care items, school supplies, and transportation costs for activities, appointments, or school. The amount provided is calculated based on the estimated costs of caring for a child.

Variations in Support Amounts

The amount of financial support foster parents receive is not standardized and can vary considerably across different situations. These variations are influenced by the specific state or local agency administering the foster care program and the child’s age, with higher payments often allocated for older children due to their increased needs. A child’s specific needs significantly impact the level of financial support provided. Children with medical conditions, special education needs, behavioral challenges, or therapeutic requirements often qualify for additional “difficulty of care payments.” The type of foster care provided, such as basic, specialized, or therapeutic care, also influences the payment rates, reflecting the differing costs associated with various levels of support.

Tax Treatment of Foster Care Payments

Under U.S. tax law, qualified foster care payments are generally excludable from gross income and are therefore not taxable. This exclusion applies to amounts received by a foster care provider for caring for a qualified foster individual in the provider’s home, as stipulated under Internal Revenue Code Section 131. A “qualified foster individual” is defined as any individual living in a foster family home who was placed there by a state agency, a political subdivision, or a qualified foster care placement agency. The exclusion also extends to “difficulty of care payments,” which are additional compensations for providing care to physically, mentally, or emotionally handicapped individuals.

There are specific limitations to this exclusion based on the number of individuals cared for. For general foster care payments, amounts are not excludable if they are for more than five qualified foster individuals aged 19 or older. Difficulty of care payments are excludable only if they are for no more than ten qualified foster individuals under age 19, or no more than five qualified foster individuals age 19 or older. While these payments are typically not taxable income for the foster parent, payments received specifically for maintaining space in a home for emergency foster care may be taxable.