Becoming a foster parent means providing a welcoming and secure home to a child in need. Although states offer financial assistance, foster parents should plan for additional expenses to ensure they can meet the child’s needs. Understanding the financial requirements, available benefits and potential costs can help foster parents prepare effectively.
Becoming a Foster Parent: Financial Guide
Advertising & Editorial Disclosure
Key Takeaways
Demonstrate financial stability by providing proof of income and ensuring you can manage household expenses without relying solely on stipends.
Plan for associated costs — including food, clothing, housing, transportation and child care — which may exceed the support provided by state programs.
Prepare your home by meeting safety standards, completing home studies and creating a welcoming environment for your child.
Access financial support through monthly stipends, child care assistance, Medicaid coverage and tax benefits to help manage fostering expenses.
Costs of Fostering a Child
Fostering a child involves various expenses that can quickly add up, especially as costs rise with inflation. It is estimated that raising a child born in 2015 through age 17 in 2032 will cost $310,605 in 2022 dollars — a significant increase from the USDA's 2015 estimate of $233,610 to raise a child to age 17. Most of these expenses go to housing, food, child care and education.
Before you decide to foster a child, you'll want to consider all the potential costs involved and create a budget to ensure you're financially prepared. After you've added up all of your income and factored in your current expenses, you'll have a clear idea of how much money you have available to help foster a child. You can compare that to the typical average cost of items below to start budgeting to be a foster parent.
Expense | Average Cost | Description |
|---|---|---|
Food | $200–300 per month | Food expenses depend on the child's age and dietary needs. Younger children may cost less to feed, while teenagers, who typically eat more, can increase grocery bills. |
Child Care and Education | $5,500–15,000 per year | Costs for daycare or after-school programs vary by location. For school-age children, additional expenses like school supplies, extracurricular activities and tutoring may arise. |
Health Care | Varies | Most foster children are covered by Medicaid, but foster parents should budget for occasional out-of-pocket costs, such as copays or additional therapies. |
Housing | $500–2,500 | Foster children need a safe, dedicated sleeping space. This may involve furnishing a bedroom or making minor home modifications to meet state requirements. |
Clothing and Personal Items | $500–1,000 per year | Regular purchases of seasonal clothing, shoes and personal care items are necessary. Costs can vary depending on the child's age and specific needs. |
Transportation | $150–400 per month | Foster parents may face higher fuel and vehicle maintenance costs. Teenagers may also need to pay additional expenses for driver's education or auto insurance. |
Technology | $500–1,500 | Many foster children need access to a computer for schoolwork. If you don't already have one available, purchasing or refurbishing a laptop may be necessary. |
Recreational Activities | $500–2,000 per year | Participation in sports, hobbies or other extracurricular activities enriches a child's development but can add to your budget. |
Financial Requirements for Foster Parenting
States want to ensure prospective foster parents can provide a safe, healthy home and demonstrate financial stability. Although no specific income requirement exists to become a foster parent, some states may have defined income thresholds. Here are tips on how prospective foster parents can prove financial stability.
Show Proof of Income
States often require pay stubs, tax returns or other documentation to confirm you can cover household expenses — including rent or mortgage, utilities and food — as well as the needs of a foster child.
Budget for Preservice Costs
Prospective parents may face upfront costs such as completing preservice training or ensuring their home meets state requirements. These could include health and safety inspections or home upgrades, typically paid out of pocket.
Prove Financial Responsibility
Good credit is not mandatory, but families with low credit scores may need additional proof of sufficient income to demonstrate financial stability. Having debt does not disqualify a family, but prospective foster parents must show that their budget can support the addition of a child without undue financial strain.
Prepare Emergency Funds
Having savings or financial reserves can help cover unexpected costs, such as medical expenses or home repairs, ensuring the foster child's well-being.
Getting Your Home Ready for Foster Children
A foster child deserves a nurturing environment that complies with state regulations while making them feel welcome and secure. Preparing your home is a crucial part of the approval process and includes meeting home study requirements and making any needed adjustments to create a safe living space.
Home Study Requirements
Every foster parent must complete a home study conducted by a state agency to gain approval. This process includes an in-depth inspection by a representative from your state's child welfare organization to ensure the home environment is safe and suitable for fostering. Although the exact requirements vary by state, the following checklist can help prepare for the in-home visit:
Home Visit Prep
Home Visit Forms and Documents Checklist
|
Home Inspection Checklist
|
Home Insurance Considerations
Becoming a foster parent may introduce new risks impacting your home insurance needs. Many insurers offer additional liability coverage specifically for foster parents. You can also enhance your property insurance or add endorsements to ensure adequate protection for your family and foster child.
Financial Benefits and Assistance for Foster Parents
Foster parents can access financial benefits and assistance programs to support a stable, nurturing environment for children. To qualify, foster parents must complete licensing requirements — including training and background checks — and have a foster child officially placed in their home. Although some programs consider income, most aim to be accessible to families of all financial backgrounds.
- 1
Stipends
Stipends are the primary form of financial support for foster parents, covering daily expenses. Most states also offer monthly clothing allowances, ranging from $200 to $500, based on state regulations and the foster child’s age. For children with medical or behavioral challenges, additional stipends may be available to offset the costs of specialized care.
- 2
Medical and Dental Coverage
Most foster children are insured through Medicaid through Title IV-E of the Social Security Act or state laws. Medicaid provides coverage for routine and emergency medical care, including dental and mental health services. Note that foster parents may still face minor out-of-pocket costs for over-the-counter medications or therapies.
- 3
Child Care Assistance
Many states provide child care assistance, subsidies or voucher programs to cover daycare and after-school care, ensuring foster children receive proper supervision in a safe, nurturing environment.
- 4
Housing Grants
The U.S. Department of Health and Human Services provides housing-related subsidies to foster families through state agency grants. These funds help cover housing, food, clothing and transportation expenses. Programs like the Family Unification Program also offer housing choice vouchers for families needing adequate housing to reunite with their children or prevent foster placements. Additionally, youths aging out of foster care can receive vouchers to support their transition to independent living.
Tax Benefits and Obligations for Foster Parents
Several tax benefits help offset the costs of providing foster care, but foster parents also take on new obligations to ensure accurate reporting and compliance. Understanding these implications can help foster parents maximize savings and avoid errors.
Foster Care Payments Are Not Taxable
Foster care stipends and reimbursements provided by state or federal agencies or child placement organizations are not considered taxable income. These funds are intended to cover essential costs — such as food, clothing and specialized care for the child — and, therefore, do not need to be reported on federal tax returns.
Unreimbursed Expenses Can Be Deducted
Unreimbursed costs directly related to fostering — such as transportation, school supplies and clothing — may qualify as charitable deductions if the placing agency is recognized as a charitable entity. To claim these deductions, foster parents must itemize their tax returns and maintain detailed records and receipts of their expenses.
Foster Parents May Claim the Child as a Dependent
Foster parents may be eligible to claim their foster child as a dependent if the child lived with them for at least six months during the tax year and the foster parent provided more than half of the child's financial support. This lowers tax liability and may qualify foster parents for credits like the Child Tax Credit or Earned Income Tax Credit (EITC).
Adoption Tax Benefits Offset Costs
Foster parents who adopt their foster child can benefit from the Adoption Tax Credit, which covers adoption-related expenses such as legal fees, court costs and travel. Additionally, some states provide further tax credits or deductions to reduce the financial burden of adoption.
Foster Parenting FAQ
Foster parenting involves various considerations, and prospective foster parents often have numerous questions. Below are frequently asked questions to help you understand the process and responsibilities.
What are the basic requirements to become a foster parent?
To become a foster parent, you generally need to:
- Be at least 21 years old
- Have a stable income to support your household
- Pass background checks and home inspections
- Complete required training sessions — specific requirements can vary by state or agency, so it's important to consult your local child welfare agency for detailed information.
Do I need to own a home to foster a child?
No, homeownership is not a requirement. Both renters and homeowners can become foster parents, provided their living space meets safety and space standards set by the licensing agency.
Can single individuals become foster parents?
Yes, single individuals are eligible to foster children. Agencies assess the ability to provide a stable and loving environment, regardless of marital status.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
sources
- Administration for Children and Families. "Grants." Accessed December 23, 2024.
- Brookings Institution. "Future Estimated Annual Expenditures of Raising a Child." Accessed December 23, 2024.
- Internal Revenue Service. "Earned Income Tax Credit (EITC)." Accessed December 23, 2024.
- Internal Revenue Service. "Understanding the Adoption Tax Credit." Accessed December 23, 2024.
- Social Security Administration. "Social Security Act: Title IV Part A: Block Grants to States for Temporary Assistance for Needy Families." Accessed December 23, 2024.
- U.S. Department of Agriculture. "The Cost of Raising a Child." Accessed December 23, 2024.
- U.S. Department of Housing and Urban Development. "Housing Choice Voucher Program: Family Eligibility." Accessed December 23, 2024.