Foster Care Payments Are Not Taxable Income

Submitted by PeterAKenny on November 27, 2018

On December 15, 2017, the Indiana Department of Child Services (DCS) described an adjustment to payments for foster parents. They sent them the following brief message: “We are writing to inform you of the foster care per diem rates for this upcoming year. There is a slight adjustment based upon the increase in the consumer price index. The new rates are as follows:

Age 0-4$20.53
Age 5-13$22.29
Age 14-18$25.72

The letter noted an additional daily increase of about $8.00 per day for “care with services,” and more substantial increases for those foster parents who have been approved for "therapeutic care."

Foster care payments are reimbursement for the daily costs of raising a child, and are not considered taxable income by the IRS. The payments need not be included on the foster parents’ tax return if the care was provided to a qualified foster child and the money was paid by a state or qualified agency.

Having a foster child in the home does not change the family’s status for receiving food stamps.

The foster child cannot receive benefits as a separate SNAP household. However, any other income received for the child, such as child support, still does not count as income to the foster family household.

(Obviously, these payments are for foster care. For payments after the adoption of a foster child, please refer to my blog post on subsidies.)

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