May 17, 2010 12:00 am

Foster Care Payments to a Biological Parent Are Taxable

Some states give payments to a parent to look after his or her disabled child. These payments may fall under a foster care system. The tax law excludes from income the amount of foster care payments. However, the IRS makes it clear that foster care payments means only payments made to someone who is “fostering” a child and is not the child’s biological parent. Thus, payments to a biological parent are taxable.

Source: Program Manager Technical Assistance 2010-007

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Tax Glossary

Health savings account

For calendar year 2007, taxpayers covered by an HDHP may contribute up to the lesser of the annual deductible or $2,850 ($5,650 for family coverage).

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