Foster families may be missing out on tax benefits

December 19, 2019

More than $150 million dollars in Earned Income Tax Credit (EITC) go unclaimed in Colorado every year. Foster families often don’t realize they are eligible for the EITC, which can provide families with children and teens with up to $6,500 to help alleviate the financial burden of transportation, child care and housing costs.  

“In Colorado one in four eligible people miss out on the EITC. Foster parents and grandparents raising children are likely to be unaware they are eligible,” said Kelly Wagoner, Director of Get Ahead Colorado. “Speaking to a tax professional will help you know for sure. One of the things we have uncovered here in Denver is that most people use refunds from the EITC to catch up on bills and pay off debt-sometimes paying for a downpayment for housing or fixing a vehicle.”

Those who typically qualify for the EITC are working families and individuals ages 25 to 65 in Colorado who make less than $56,000 per year. Foster and kinship families are eligible for this benefit as long as a child or youth lives in the home for at least six months out of the year. 

Foster, adoptive and kinship families who make over $56,000 a year might be eligible for other tax credits including: the Child Tax Credit (CTC) and the Child and Dependent Care Tax Credit (CDCTC). The Child Tax Credit (CTC) is a partially refundable federal tax credit worth $2,000 per qualifying child or youth. The Child and Dependent Care Tax (CDCTC) credit is an additional federal and state tax credit worth up to $2,100 for families with two or more children in child care. Wagoner says parents and guardians can claim this credit for summer day camps and before and after school care in addition to traditional child care.  In order to claim the CDCTC, guardians will need to provide the tax number of the child care provider and amount that was paid throughout the year. Unlike the EITC, an Individual Taxpayer Identification Number (ITIN) can also be used instead of a Social Security Number (SSN) to claim the CTC or CDCTC. 

To claim the EITC, CDCTC and CTC, foster parents must meet the same income, relationship, age and residency requirements as other workers. There are some additional considerations for foster parents and kinship providers. 

  • A child or teen must be legally placed in the care of a foster or kinship parent.
  • Monthly foster care reimbursements do not count as income when determining eligibility for the EITC and the CTC.
  • Legal guardianship of a child or teen is not required to claim the EITC and CTC.
  • A child or teen in foster care does not have to be in the foster parent’s home at the end of the year to be claimed, but must have lived with the foster parent at least six months out of the year.
  • To claim the EITC guardians must have the child’s Social Security Number to be able to claim them. 

When claiming the EITC, it is important that only one person is claiming a child or youth. Generally, a guardian is able to claim a child on their tax return if they provided more than half the child’s support and have the child or youth’s Social Security Number.

Families earning less than $66,000 per year can file their taxes for free with a valid email address and the previous year’s adjusted gross income at MyFreeTaxes.com. It typically takes less than an hour to file a return using MyFreeTaxes.com. 

Every year, Get Ahead Colorado works to increase awareness about cash-back tax credits and free tax preparation services for families earning less than $56,000 per year. Learn more about the EITC and estimate your refund here.  Get Ahead Colorado is a program of the Piton Foundation which provides resources to families in Colorado who qualify for the EITC.

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