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

Tax Glossary

Qualified dividends

Dividends received after 2002 and before January 1, 2011, that are taxed at the long-term capital gain rate.

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