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Education for Justice |
FACT SHEET T-7 |
for tax year 2011 |
TAX
RULES FOR ADOPTION, FOSTER CARE AND RELATIVES RAISING KIDS
IF I GET MONEY TO TAKE CARE OF A CHILD, DOES IT COUNT AS
INCOME ON MY TAX RETURN?
The money you get for any of the following things, DOESN’T
count as income on your taxes.
·
Cost of care payments
·
“Difficulty of care” payments, (extra money you
get if you care for a physically, mentally, or emotionally disabled foster
children)
·
Adoption assistance that pays for child care
·
MFIP, and Food Stamps
·
Caring for 10 or fewer children if the
money comes from a for-profit child welfare agency that works under a contract
with a government agency
You can use these payments to figure out the amount
of
The money you get for any of the following things is taxable
and DOES count as income on your taxes.
·
Caring for more than 10 foster children
·
Keeping a bed available even if it is not used
·
Operating a group home
·
Caring for more than 5 people over the age of 19
CLAIMING SOMEONE ELSE ON YOUR TAX
RETURN
For tax years after 2005 the definitions have changed about
who you can claim. There is a
“qualifying child” and a “qualifying relative.”
Qualifying Child
·
The child must be the taxpayer’s child,
stepchild, eligible foster child, brother, sister, stepbrother, stepsister or a
descendent of one of these relatives.
This includes a child placed with the taxpayer for adoption, even if the
adoption is not final. An eligible
foster child is any child placed with the taxpayer by an authorized placement
agency or court.
·
The child must live with the taxpayer for more
than 6 months of the year in the
·
The child
must be younger than the taxpayer unless they are permanently and totally
disabled. There are different age limits
for the various credits:
-
Credit
for Child and Dependent Care Expenses – the child must be under age 13 when
the care was provided or any age if the child is disabled and cannot take care
of themselves.
-
Child Tax
Credit – child must be under age 17 on December 31, 2011.
-
Dependency
Exemption, Head of Household filing status, and Earned Income Tax Credit (EITC)
– the child must be under age 19 or a full-time student under age 24 on
December 31, 2011, or any age if permanently and totally disabled.
·
The child cannot have provided over half of his
or her own support during the year.
Social Security benefits received for a child as the beneficiary of a
deceased or disabled parent are included in the child’s income. The support test does not apply when
determining if the taxpayer has a qualifying child for the EITC.
·
If the child can be claimed by a parent as a
qualifying child, but neither parent claims the child NO ONE ELSE can claim the
child unless their Adjusted Gross Income (AGI) is higher than the AGI of either
parent. This situation can happen when
extended family lives together.
·
If a child is a qualifying child for more than
one taxpayer, and they can’t agree on who will claim the child, the parent who
lived with the child longest that year should claim the credit. If the child lived with both parents for the
same length of time, the parent with the higher income should claim the
credit.
If the child:
then the taxpayer with the highest
income will get the credit.
Qualifying Relative
A qualifying relative is someone who is:
·
a U.S. Citizen or lived in the
·
a member
of your household for the whole year (even if not related to you), or a
family member who may or may not live with you like:
- your child,
grandchild, great grandchild, stepchild,
- your brother,
sister, half brother, half sister,
stepbrother, stepsister,
- your parent,
grandparent, stepparent,
- your aunt or
uncle, niece or nephew,
- your
father-in-law, mother-in-law, son-in-law, daughter-in-law,
- brother-in-law, or
sister-in-law.
The child or person usually can’t be your dependent if:
·
They are married and file joint taxes with their
spouse.
·
They earn more than $3,700 during 2011. But,
if the person is your child under age 19 or a student under 24, they can still
be your dependent and earn more than $3,700.
The rules above are for federal taxes.
IRS Publications 17 and 501 have worksheets to
help figure out if you meet the support test.
You can call the IRS at 1-800-TAX-1040 or go to their website at www.irs.gov to get these.
Foster
parents who claim a “charitable deduction” for certain costs (see below) can’t
use those same costs to meet the support test.
If you meet the rules to claim the child as a dependent, and
the child is under age 17, you may be able to get the Child Tax Credit,
which is worth up to $1000 per child.
CAN MY OUT OF POCKET COSTS FOR CARING FOR THE CHILD BE
COUNTED AS A “CHARITABLE DEDUCTION”?
If you paid for things to help care for and support a foster
child, and you didn’t get the money back from the government (reimbursement),
you may be able to claim this money as a “charitable donation” and end up
paying less tax. You need to fill out
Schedule A, Itemized Deductions.
Any money you spent but DID get back from the government
CAN’T be claimed as a “charitable deduction”.
Foster parents can’t claim a charitable
deduction for costs used to meet the support test for claiming a dependent. (see above)
Legal guardians can’t claim a charitable
deduction for out of pocket costs for the care and support of the child.
CAN I CLAIM THE
CHILD AS A QUALIFYING CHILD@
FOR THE EARNED INCOME TAX CREDIT (EITC) AND THE MINNESOTA WORKING FAMILY TAX
CREDIT (WFTC)?
Yes, if that child meets the definition of “qualifying
child” on the first page of this fact sheet.
A “qualifying relative” cannot be
claimed for the EITC or WFTC.
DO DAYCARE EXPENSES COUNT AS A DEDUCTION?
You may be able to get the Federal Child and Dependent Care
Credit or the Minnesota Child and Dependent Care Credit if the child
·
qualifies as your dependent,
·
was under age 13 during the tax year, AND
·
was cared for by
someone else (that you paid) while you worked or looked for work.
If the child was age 13 or over, disabled and not capable of
self-care, you may also be able to get these credits.
Many low income families who can’t claim the federal credit do
qualify to claim the
WHAT IS THE ADOPTION TAX CREDIT?
The Adoption Tax Credit is a refundable credit for certain costs you had during the
adoption of a child. The maximum credit
is $13,170. Costs that count for the
credit are things like
·
adoption fees
·
court costs
·
attorney fees
·
medical expenses
·
travel expenses
The child must be under age 18 or mentally or physically
disabled. If you adopt a special needs
child you may be able to get the full credit even if you have not spent that
amount. To get the credit, the special
needs child must be a
CAN I CLAIM A CREDIT FOR EDUCATION EXPENSES?
If you can claim the child as a dependent, and the child is
enrolled in a post-secondary institution (like college), you may be able to
claim a tax credit or deduction based on tuition paid. To get more information on the federal
education tax credits and deduction, see IRS publication 970. Call 1-800-TAX-1040, or got to www.irs.gov.
If the child is a qualifying child for the EITC, and is in
Kindergarten through 12th grade, you may be able to get a Minnesota
tax credit or a subtraction for education expenses. You can get the credit even if you
don’t have earned income. You can get
the credit and up to 75% of eligible costs back if your
household income is below $37,500 with 1 or 2 qualifying children. If you have more qualifying children, the
maximum household income allowance goes up by $2,000 per child. You can take the subtraction no matter
what your income is.
Eligible costs include
·
after school academic programs
·
music lessons
·
academic summer camps
·
computer hardware or software ($200 maximum)
·
paper, pens, pencils
etc.
·
private school tuition
(this can only be a subtraction not a credit).
IF
YOU HAVE NOT FILED, FILE NOW!
The
EITC and other income tax credits can be claimed up to 3 years late. If you did not file a tax return for some or
all of the last 3 years, you can file now and claim the EITC and other credits. The forms and credit amounts change each
year. Be sure to use the form for the
year that you are filing for! For forms
call the IRS at the number below or get them off their website, www.irs.gov.
If you did file your return, but did not claim credits you now think you
could have used, you can file an amended Form 1040X (federal) or M-1X (
If
you met all the rules for getting the EITC in the years before now, except that
you did not have a social security number, but now you do, you can use your new
social security number to file your tax returns and claim the EITC for the past
3 years.
For
federal tax questions, call 1-(800) TAX-1040.
For
Free tax preparation is available for low income,
disabled persons, and senior citizens. To find help near you,
call (651) 297-3724 or
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This fact sheet applies only to the tax year
2011 Income tax returns must be filed by April 17th,
2012 |
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MN Legal Services Coalition |
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Legal Assistance. This document may be
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