Title 26 — Internal Revenue CodeRelease 119-73
§131 Certain foster care payments
Title 26 › Subtitle Subtitle A— - Income Taxes › Chapter CHAPTER 1— - NORMAL TAXES AND SURTAXES › Subchapter Subchapter B— - Computation of Taxable Income › Part PART III— - ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME › § 131
Summary
Foster parents do not have to count certain payments they get for caring for foster children as taxable income. The rule covers payments from a state (or local government) or from a licensed placement agency. It applies when the money is paid to a foster parent for a child placed in their home by a state agency or a licensed placement agency. A licensed placement agency is one the state has approved. Extra "difficulty of care" payments are excluded only when they pay for added care needed because of a child’s physical, mental, or emotional disability, are given for care in the foster home, and are marked by the payer as such. There are limits: regular foster payments (not difficulty payments) are not tax-free for more than five foster individuals age 19 or older in the same home. Difficulty payments are not tax-free for more than ten foster individuals under age 19 and more than five foster individuals age 19 or older.
Full Legal Text
Title 26, §131
Internal Revenue Code — Source: USLM XML via OLRC
(a)Gross income shall not include amounts received by a foster care provider during the taxable year as qualified foster care payments.
(b)For purposes of this section—
(1)The term “qualified foster care payment” means any payment made pursuant to a foster care program of a State or political subdivision thereof—
(A)which is paid by—
(i)a State or political subdivision thereof, or
(ii)a qualified foster care placement agency, and
(B)which is—
(i)paid to the foster care provider for caring for a qualified foster individual in the foster care provider’s home, or
(ii)a difficulty of care payment.
(2)The term “qualified foster individual” means any individual who is living in a foster family home in which such individual was placed by—
(A)an agency of a State or political subdivision thereof, or
(B)a qualified foster care placement agency.
(3)The term “qualified foster care placement agency” means any placement agency which is licensed or certified by—
(A)a State or political subdivision thereof, or
(B)an entity designated by a State or political subdivision thereof,
(4)In the case of any foster home in which there is a qualified foster care individual who has attained age 19, foster care payments (other than difficulty of care payments) for any period to which such payments relate shall not be excludable from gross income under subsection (a) to the extent such payments are made for more than 5 such qualified foster individuals.
(c)For purposes of this section—
(1)The term “difficulty of care payments” means payments to individuals which are not described in subsection (b)(1)(B)(i), and which—
(A)are compensation for providing the additional care of a qualified foster individual which is—
(i)required by reason of a physical, mental, or emotional handicap of such individual with respect to which the State has determined that there is a need for additional compensation, and
(ii)provided in the home of the foster care provider, and
(B)are designated by the payor as compensation described in subparagraph (A).
(2)In the case of any foster home, difficulty of care payments for any period to which such payments relate shall not be excludable from gross income under subsection (a) to the extent such payments are made for more than—
(A)10 qualified foster individuals who have not attained age 19, and
(B)5 qualified foster individuals not described in subparagraph (A).
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Prior Provisions
A prior section 131 was renumbered section 140 of this title.
Amendments
2002—Subsec. (b)(1). Pub. L. 107–147, § 404(a), amended provisions preceding subpar. (B) generally. Prior to amendment, text of such provisions read as follows: “The term ‘qualified foster care payment’ means any amount— “(A) which is paid by a State or political subdivision thereof or by a placement agency which is described in section 501(c)(3) and exempt from tax under section 501(a), and”. Subsec. (b)(2)(B). Pub. L. 107–147, § 404(b), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: “in the case of an individual who has not attained age 19, an organization which is licensed by a State (or political subdivision thereof) as a placement agency and which is described in section 501(c)(3) and exempt from tax under section 501(a).” Subsec. (b)(3), (4). Pub. L. 107–147, § 404(c), added par. (3) and redesignated former par. (3) as (4). 1986—Subsec. (a). Pub. L. 99–514 amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “Gross income shall not include amounts received by a foster parent during the taxable year as qualified foster care payments.” Subsec. (b). Pub. L. 99–514 amended subsec. (b) generally. Prior to amendment, par. (1) “In general” read as follows: “The term ‘qualified foster care payment’ means any amount— “(A) which is paid by a State or political subdivision thereof or by a child-placing agency which is described in section 501(c)(3) and exempt from tax under section 501(a), and “(B) which is— “(i) paid to reimburse the foster parent for the expenses of caring for a qualified foster child in the foster parent’s home, or “(ii) a difficulty of care payment.” and par. (2) “Qualified foster child” read as follows: “The term ‘qualified foster child’ means any individual who— “(A) has not attained age 19, and “(B) is living in a foster family home in which such individual was placed by— “(i) an agency of a State or political subdivision thereof, or “(ii) an organization which is licensed by a State (or political subdivision thereof) as a child-placing agency and which is described in section 501(c)(3) and exempt from tax under section 501(a).” Subsec. (c). Pub. L. 99–514, in amending subsec. (c) generally, in par. (1)(A), substituted references to “qualified foster individual”, “such individual”, and “foster care provider” for references to “qualified foster child”, “such child”, and “foster parent”, respectively, and in par. (2) substituted “more than (A) 10 qualified foster individuals who have not attained age 19, and (B) 5 qualified foster individuals not described in subparagraph (A)” for “more than 10 qualified foster children”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2002 Amendment Pub. L. 107–147, title IV, § 404(d), Mar. 9, 2002, 116 Stat. 42, provided that: “The
Amendments
made by this section [amending this section] shall apply to taxable years beginning after December 31, 2001.”
Effective Date
of 1986 Amendment Pub. L. 99–514, title XVII, § 1707(b), Oct. 22, 1986, 100 Stat. 2782, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 1985.”
Effective Date
Pub. L. 97–473, title I, § 102(c), Jan. 14, 1983, 96 Stat. 2607, provided that: “The
Amendments
made by this section [enacting this section] shall apply to taxable years beginning after December 31, 1978.”
Reference
Citations & Metadata
Citation
26 U.S.C. § 131
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73