Sponsors (5)
The bill provides a modest, targeted tax credit and better data/outreach to help foster families claim support and inform future policy, but it limits benefits for the poorest, adds reporting/privacy and compliance burdens, and relies on studies that do not deliver immediate financial relief.
Foster families receive an $850 tax credit per qualifying foster child each year, reducing their federal income tax liability and lowering out-of-pocket costs for many caregivers.
Required information returns from placement agencies combined with HHS and Treasury outreach should increase awareness, improve claim accuracy, and speed access to the credit for foster families.
The credit is structured with phaseout thresholds so many lower- and middle-income foster households gain targeted support rather than benefits flowing only to higher earners.
Very low-income foster families with little or no federal tax liability may receive no benefit because the $850 credit is nonrefundable.
New reporting requirements (collection of TINs and placement data), strict disallowance periods for fraud/reckless claims, and added paperwork raise privacy concerns, increase administrative burdens on agencies and courts, and could deter prospective foster parents.
High-income phaseouts and the $17,000 reduction formula limit the credit’s value for many households and add complexity to tax filings.
Based on analysis of 3 sections of legislative text.
Creates an $850 nonrefundable federal tax credit for eligible foster caregivers with income-based phaseouts and requires an HHS study on short-term foster placement burdens and verification.
Official title: To amend the Internal Revenue Code of 1986 to create a refundable tax credit for foster families, and for other purposes.
Introduced March 27, 2025 by Erin Houchin · Last progress March 27, 2025
Creates a new nonrefundable federal tax credit of $850 for eligible foster caregivers who had a qualifying foster child placed with them for at least one month during the tax year, with income-based phaseouts and rules to prevent repeat improper claims. Requires HHS, working with Treasury, to study financial burdens and verification challenges for families with multiple short-term or emergency foster placements and to report findings to Congress within one year.