Principal Issues: Are foster parents able to claim the child tax credit under paragraph 118(1)(b.1) of the Act in respect of foster children for which they receive monthly funds from a government agency?
Position: No.
Reasons: The extended meaning of "child" in subsection 252(1) of the Act does not include a foster child for whom the foster parents receive support payments from an agency responsible for the child's care.
XXXXXXXXXX 2010-038234 T. Posadovsky, CMA (613) 952-8283
October 7, 2010
Dear XXXXXXXXXX :
Re: Child tax credit
We are writing in reply to your letter dated September 22, 2010, concerning the child tax credit. Specifically, you wish to know whether foster parents are able to claim the tax credit available under paragraph 118(1)(b.1) of the Income Tax Act (the "Act") in respect of foster children for whom they receive monthly payments from a government agency.
In the situation you described, two foster children lived with their foster parents for all of 2009 and part of 2010, at which time the foster parents adopted the children. The foster parents received monthly payments from the government in respect of both foster children up until the date the adoption was finalized.
Our Comments
In order for an individual to qualify for the child tax credit, subparagraph 118(1)(b.1)(i) of the Act requires that a "child" of the individual ordinarily resides throughout the taxation year with the individual together with another parent of the child.
Whether or not a foster child is a "child" for the purposes of the child tax credit is a question of fact. "Child" is not defined in the Act, but subsection 252(1) extends the normal meaning of "child" to include:
1) a person of whom the taxpayer is the legal parent;
2) a person who is wholly dependent on the taxpayer for support and of whom the taxpayer has, or immediately before the person attained the age of 19 years had, in law or in fact, the custody and control;
3) a child of the taxpayer's spouse or common-law partner; and
4) a spouse or common-law partner of a child of the taxpayer.
To meet the extended meaning of "child", the foster children would have to be "wholly dependent on the taxpayer for support". If the foster parents received support payments from a government agency to be used for the purposes of caring for the foster children, such an arrangement would mean that the foster children are not wholly dependent on the foster parents for support.
In conclusion, neither foster parent in the situation you presented would be able to claim the child tax credit in respect of the foster children in 2009 as a "child" does not include a foster child for whom the foster parents receive support payments from an agency responsible for the child's care. However, one of the foster parents may be eligible to claim the child tax credit in 2010 pursuant to subsection 118(9.1) of the Act, since the full child tax credit may be claimed in the year of a child's birth, death, or adoption.
We trust our comments will be of assistance to you.
Yours truly,
Randy Hewlett
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch