Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Tax treatment of foster care payments.
Position: Not taxable.
Reasons: Excluded by 81(1)(h)
Tim Fitzgerald
XXXXXXXXXX (519)973-7999 ext. 6509
2005-013134
June 9, 2005
Dear XXXXXXXXXX:
Re: Social Assistance Payments to Caregivers for Foster Care
This is further to your letter of May 4, 2005 wherein you requested income tax information relating to the provision of foster care, and to your telephone discussions of this week with Tim Fitzgerald.
You have asked that we confirm that as a foster parent, you are 100% exempt from reporting any income earned for fostering. You also asked that we confirm whether you are 100% exempt from paying income tax on earnings from fostering.
We cannot confirm the tax implication of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. However, we offer the following general comments in response to your questions.
Section 81 of the Income Tax Act (ITA) lists various amounts that are not included in computing a taxpayer's income. Paragraph 81(1)(h) specifically exempts from income, social assistance payments made to an individual caregiver (the "Caregiver") for the benefit of a foster person ("the Cared-for individual") under the Caregiver's care. The Cared-for individual can be either a child or an adult.
This exemption applies to an amount received by the caregiver when all of the following conditions are met:
1. The payment is a social assistance payment ordinarily made on the basis of a means, needs or income test.
2. The payment is made under a program provided for by a federal, provincial or territorial law.
3. The payment is received directly or indirectly by the Caregiver for the benefit of the Cared-for individual.
4. The Cared-for individual is not the Caregiver's spouse or common-law partner or related to the Caregiver or the Caregiver's spouse or common-law partner.
5. No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law is payable in respect of the Cared-for individual for the period for which the social assistance payment is made.
6. The Cared-for individual resides in the Caregiver's principal place of residence, or the Caregiver's principal place of residence is maintained for use as the Cared-for individual's residence, during the period of which the payment is made.
We understand that you receive social assistance payments directly from the Government of Alberta, specifically, XXXXXXXXXX. Therefore it appears that the first three conditions are met. We also understand that the foster children under your care live with you and your spouse in your principal place of residence and that these children are not related to either you or your spouse, and that no family allowance is payable in respect of the foster children under your care. Therefore, it appears that conditions 4 - 6 are also met.
Under these circumstances, the payments you receive for fostering would not be included in computing your income and no income tax would be payable in respect of them.
We trust these comments are helpful. If you require further assistance in determining the income tax status of the specific payments you are receiving for foster care, please contact the Client Assistance Division of the XXXXXXXXXX Tax Services Office.
Yours truly,
Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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