Tax Benefit Eligibility

• Federal tax benefits for kinship care are only available to families with taxable income, either as wages or income from self-employment. Families without a wage earner receiving nontaxable Social Security or Supplemental Security Income benefits are not eligible for the federal tax credits for foster children. Relatives with kinship caregiver custody based on the following relationships may claim a tax credit: grandchildren, full or half siblings and step-siblings, nieces or nephews, and minor aunts or uncles.
  
  

Benefits

• Kinship care has many advantages over a traditional foster care program. Children already know the caregiver, and the home environment may already be familiar. The parents usually prefer such arrangements, as it means their children remain connected to their natural families. Moreover, children generally already know and trust the kinship caregiver relative, and can continue family traditions, including religious observance and visits with extended family. The tax credit helps ease some of the cost of care for the kinship provider.
  
  

Credits

• Qualifying expenses for a kinship care provider tax credit include those for child care, after-school programs and summer day camp. Overnight summer camp programs do not qualify for tax credit purposes. Credits are calculated on a percentage rate of allowed expenses, up to 35 percent of the taxpayer's adjusted gross income. The maximum annual credit for expenses is $3,000 for one child and $6,000 for two children, as of July 2011. The kinship caregiver must include the child's Social Security number on all tax returns.
  
  

Nontaxable Income for Kinship Providers

• Many payments received for caring for the child do not count as taxable income and are not reported on the annual tax return. These payments include food stamps; reimbursement for care costs; government or child welfare organization reimbursements; special-needs care payments; and cash assistance only for the child, referred to as Temporary Assistance to Needy Families. Kinship providers must supply the Texas Department of Family and Protective Services with their Social security numbers, driver's license identification and information about any state or federal benefits they are receiving.