If My Child Is in Foster Care, Can I Claim Them on My Taxes?

Determining who can claim a child on a tax return is a common question, and the situation becomes more complex when a child is in the foster care system. For a biological parent, the ability to claim a child who has been placed in foster care is governed by a specific set of rules established by the Internal Revenue Service (IRS). These regulations are designed to prevent multiple individuals from claiming the same child and to ensure that the person who primarily provides a home for the child receives the associated tax benefits.

Applying the Qualifying Child Tests

To claim a child as a dependent, a taxpayer must satisfy four distinct tests outlined by the IRS: the relationship, age, support, and residency tests. For a biological parent, the relationship test is automatically met. The age test requires the child to be under age 19 at the end of the tax year, or under age 24 if they are a full-time student for at least five months of the year. A child of any age who is permanently and totally disabled also meets this requirement.

The support test requires that the child did not provide more than half of their own financial support during the year. This test focuses on the child’s own contributions to their living expenses. Any payments a parent makes are secondary to the other dependency tests, particularly the residency test.

The residency test is the most significant hurdle for a biological parent whose child is in foster care. This rule mandates that the child must have lived with the taxpayer for more than half of the tax year. The IRS allows for “temporary absences,” such as for school or vacation, to count as time the child lived at home. However, a child’s placement in foster care by a court order is not considered a temporary absence. Because the time spent in the foster home does not count toward the biological parent’s residency requirement, this factor disqualifies the biological parent from claiming the child as a dependent, even if they provide some financial support.

IRS Tie-Breaker Rules for Multiple Claimants

In some tax situations, a child might meet the qualifying child tests for more than one person. The IRS has established a hierarchy of “tie-breaker” rules to determine which person is entitled to claim the child. These rules prevent the same dependent from being claimed on multiple tax returns.

The first rule gives preference to the child’s parent, assuming they meet all the qualifying child tests. In the scenario involving foster care, the biological parent fails the residency test, while the foster parent who had the child in their home for more than half the year meets it. The claim would go to the person with whom the child lived for the longer period during the year, which would be the foster parent.

A final tie-breaker rule involves the claimants’ Adjusted Gross Income (AGI). If a child lived with more than one person for the exact same amount of time, the person with the higher AGI for the tax year gets to claim the dependent. This rule is most often applied when parents are separated but is the last resort in other complex living situations.

Eligibility for Child-Related Tax Benefits

The ability to claim a child as a dependent is linked to several tax benefits that can reduce a taxpayer’s liability or result in a larger refund. When a biological parent cannot claim a child in foster care, they also lose access to these associated credits and filing statuses for that child.

One of the most significant benefits is the Child Tax Credit (CTC). For the 2024 tax year, this credit is worth up to $2,000 for each qualifying child under the age of 17. To receive the full credit, a taxpayer’s income must be below $200,000 for single filers or $400,000 for those married filing jointly. A portion of this credit, up to $1,700 for 2024, is refundable, meaning a taxpayer can receive it even if they owe no income tax.

The Earned Income Tax Credit (EITC) is another benefit aimed at low- to moderate-income working individuals and families. The credit amount varies based on income, filing status, and the number of qualifying children. For 2024, the maximum credit ranges from $632 for a taxpayer with no children to $7,830 for a taxpayer with three or more children.

Finally, claiming a qualifying child may allow an unmarried individual to use the Head of Household filing status. This status provides a higher standard deduction and more favorable tax brackets compared to filing as single. For 2024, the standard deduction for Head of Household is $21,900, compared to $14,600 for single filers. To qualify, the taxpayer must be unmarried, pay for more than half the cost of keeping up a home, and have a qualifying child or dependent live with them for more than half the year.