Exploring Foster Parenting? Here’s What You Should Know Before Committing.
If you have already taken a child into your care as a foster parenting or are contemplating becoming one, it’s crucial to understand how this decision can impact your finances and taxes. Welcoming a child into your home as a foster parent is a significant responsibility, but it can also be an incredibly rewarding experience. Before making this commitment, here are some key points you should be aware of.
Here’s What You Need to Know.
Who can be a foster parent?
Foster parents can be individuals or couples from diverse backgrounds, as long as they can provide a stable and caring home. However, it’s important to note that being a foster parent does not automatically grant legal guardianship of the child.
How does it affect your taxes?
Foster parents are unable to claim the Canada Child Benefit (CCB) for the children under their care. Instead, the government pays the agency children’s special allowances, which are equivalent to the CCB amount. The agency may request these allowances to be paid directly to the foster parent. Furthermore, the legal guardian of the child can vary depending on the situation, which may affect the tax deductions and credits normally available to parents.
How do care payments work?
Foster parents receive monthly payments to cover the day-to-day expenses of the child in their care. The amount is determined based on factors such as the type of care provided, the province or territory of residence, and the specific needs of the child (e.g., age, physical, developmental, emotional, or mental needs).
How does it affect your taxes?
The monthly care payment received by foster parents is not considered taxable income by the Canada Revenue Agency (CRA) as it is intended to support the child directly. Additionally, it does not impact your eligibility for federal or provincial benefits, such as the GST/HST credit.
Fostering a child involves making a significant commitment, and understanding the financial aspects is crucial. Knowing the available credits and deductions will help you determine if you’re ready to embark on this journey.