Thinking of becoming a Foster Parent? Here’s 3 things to know
If you’ve taken a child into your care as a foster parent, or are thinking about becoming one, it’s important to know how it might affect your finances and taxes. There’s lots to consider when taking a child into your home, and it can be an incredibly rewarding experience! Here’s what you should know before you make this commitment.
Who can be a foster parent?
Foster parents can be individuals or couples, and come from all walks of life as long as they’re able to provide a stable and caring home. It’s important to remember that while a child is under a foster parents’ care, that doesn’t necessarily make them their designated legal guardian.
How that affects your taxes: Foster parents cannot claim the Canada Child Benefit (CCB) for the children under their care. Instead, the government pays the agency children’s special allowances, which are the same amount as the CCB. The agency may request the government to pay these allowances directly to the foster parent.
Who is the legal guardian of the child?
In some situations, the legal guardian will be the ministry responsible for foster care in the child’s province or territory. In others, the child’s parents might maintain legal guardianship, even if their child is placed in a foster home. Foster parents could be named legal guardians as well.
How that affects your taxes: Foster parents who aren’t the legal guardians of a child cannot claim the deductions or tax credits to which parents are normally entitled.
How do care payments work?
If you’re a foster parent, you’ll receive monthly payments to cover the costs of the day-to-day care of the child you’re looking after. The amount will depend on a variety of factors, including the type of care being provided, and the province or territory you live in. A child’s age, physical, developmental, emotional or mental needs are all taken into account for the payment calculations.
How it affects your taxes: Many potential foster parents don’t realize that the monthly care payment is not considered taxable income by the Canada Revenue Agency (CRA), because it goes directly to supporting the child in your home. Neither does it affect your entitlement to federal or provincial benefits such as the GST/HST credit.
Fostering a child is a big decision, and getting all the details of how you can best provide for them is an important part of the process. Knowing what credits or deductions are available to you will help you figure out if you’re ready to make this commitment.
Still have questions about how becoming a foster parent affects your taxes? Stop in at H&R Block. Find an office near you, or if you’re ready to file, do it yourself with our free online software.