Government Grants for Foster Parents: Rates, Allowances, and Tax Rules

Government grants for foster parents are, in almost every case, monthly reimbursement payments made by your state’s child welfare agency once you’re licensed and a child is placed with you. The federal government funds a large share of those payments through Title IV-E of the Social Security Act, but it doesn’t cut checks to individual families. On top of the base monthly rate, foster parents can qualify for clothing and child care allowances, higher rates for children with medical or behavioral needs, tax exclusions, Medicaid coverage for the child, and subsidies that continue if a foster placement turns into an adoption or guardianship.

How Foster Parents Get Paid

Payments to foster parents are structured as reimbursements for the cost of caring for the child, not as wages. States set the rates. The federal government reimburses states for a portion of those costs through Title IV-E, matching maintenance payments at the state’s Medicaid rate (between 50% and 80%), training costs at 75%, and administrative expenses at 50%.¹

Not every foster child triggers Title IV-E reimbursement. Eligibility ties back to income criteria from the 1996 Aid to Families with Dependent Children program, and the child must have entered care through a court process with specific findings, then be placed in a licensed foster home or child care institution.² For children who don’t qualify, states draw on other federal sources, including Temporary Assistance for Needy Families, Title IV-B, and the Social Services Block Grant. States and localities cover about half of all child welfare spending from their own budgets.³

For you as a foster parent, the funding source rarely matters. What matters is your state’s rate schedule, which is where the actual dollars come from.

Monthly Base Rates by State

States set base payments that scale with the child’s age, with older children generally drawing higher rates. The base is meant to cover food, clothing, shelter, basic transportation, and personal care. The amounts vary considerably.

Oregon pays $958 per month for children ages 0 through 5, rising to $1,022 for ages 13 through 20.⁴ Washington State starts at $722 per month for the youngest children with no identified health or behavioral needs, and moves up from there.⁵ Missouri pays licensed foster families $509 per month for children ages 0 through 5, $577 for ages 6 through 12, and $712 for teenagers. Missouri also pays reduced rates during an initial 90-day period for families that are not yet licensed.⁶

Because base rates diverge this sharply from state to state, the only reliable figure for you is the one on your state agency’s schedule.

Allowances on Top of the Base Rate

Most states layer additional payments over the monthly base. These typically cover specific categories of expense.

Clothing allowances. Missouri pays annual clothing allowances of $320 to $700 depending on age. Michigan builds semiannual clothing amounts of $157 to $172 into the daily rate and adds an initial clothing allowance of $210 to $500 when a child first enters care. Maryland includes monthly clothing amounts of $60 to $100 within the board rate.⁶⁷⁸
Child care. Oregon provides $375 per month per child for child care, generally for children up to age 12.⁴
Mileage and transportation. Several states reimburse mileage for transporting foster children to school, visitation, and appointments.
Holiday allowances. Michigan provides a $75 holiday allowance for foster children in care as of November 30.⁷
Respite care. Missouri reimburses respite at rates of $15.50 to $63 per session depending on the child’s age, care level, and duration.⁶

Higher Rates for Children With Special Needs

Children with medical conditions, behavioral challenges, developmental disabilities, or mental health diagnoses draw substantially higher rates. States use different classification systems, but the pattern is the same: more intensive care, higher payment.

Washington State makes the range visible. A child with no identified needs draws a Level 1 payment of $722 to $860 per month depending on age. A child with a mental health diagnosis moves to Level 6, at $2,434 to $2,572. A child who has attempted suicide or required crisis mental health services reaches Level 7, at $2,777 to $2,951 per month.⁵

Oregon adds monthly payments based on the Child and Adolescent Needs and Strengths screening, ranging from $240 for moderate needs to $960 for advanced needs, on top of the base. Children who need help with daily functional activities such as hygiene, mobility, or medication management can qualify for personal care payments of $352 to over $1,057 per month.⁴

Missouri’s treatment foster care rate is $2,632 per month, and Level 2 treatment foster care reaches $3,984.⁶ New York City sorts children into three levels of difficulty, with “Exceptional Care” reserved for those needing constant medical supervision, those with severe mental illness or developmental disabilities, or those with serious behavioral challenges. Foster parents receiving these enhanced rates must complete additional specialized training hours each year.⁹ Wisconsin caps the combined basic, supplemental, and exceptional rate at $2,000 per month, and the supplemental and exceptional pieces are available only to foster parents certified at Level 2 or higher.¹⁰

Federal Tax Treatment of Foster Payments

Foster parents receive two significant federal tax breaks.

First, qualified foster care payments are excluded from gross income under Section 131 of the Internal Revenue Code. The monthly maintenance payment you receive from the state is not taxable. The exclusion also covers “difficulty of care” payments that compensate for the additional care required by a foster child’s physical, mental, or emotional needs. It applies for up to 10 foster children under age 19 and up to 5 individuals age 19 or older.¹¹ An IRS notice issued in 2014 extended the same exclusion to qualified Medicaid waiver payments made to a care provider serving an eligible individual in the provider’s home.¹²

Second, a foster child can be a qualifying child for the Child Tax Credit if the child is under 17, has a valid Social Security number, and has lived with you for more than half the tax year. For the 2025 tax year, the credit is worth up to $2,200 per qualifying child, with a refundable portion of up to $1,700 through the Additional Child Tax Credit for taxpayers with earned income of at least $2,500.¹³ Foster children who don’t meet the full Child Tax Credit requirements may still qualify for the $500 Credit for Other Dependents.

Benefits the Child Brings Into the Household

Some of the most valuable support isn’t paid to you. It’s paid on the child’s behalf and eases the household budget directly.

Children in foster care are generally eligible for Medicaid. The Affordable Care Act extended that coverage: individuals who were in foster care and enrolled in Medicaid when they turned 18 qualify for free Medicaid coverage until age 26, with no income or asset test.¹⁴ Coverage includes doctor’s visits, mental health treatment, and prescriptions.¹⁵

Foster children under age 5 generally qualify for WIC. In South Carolina, all foster children under 5 are automatically eligible, treated as a one-person family with the foster care board payment counted as the child’s income rather than yours.¹⁶ In Arizona, foster children enrolled in Medicaid through certain state health plans automatically qualify for WIC as well.¹⁷

SNAP rules vary. In Illinois, a foster care household can choose whether to include or exclude the foster child from the SNAP household. If excluded, the foster care payment isn’t counted as income; if included, the payment is budgeted as unearned income for eligibility.¹⁸

If You’re a Relative Caring for the Child

Kinship caregivers can access financial support, and how much often depends on whether the relative becomes a licensed foster parent. Maryland states that licensed kinship caregivers receive the same financial, concrete, and emotional support as non-relative foster homes.¹⁹

Texas offers a middle path. Kinship caregivers who are not fully verified as foster parents can receive a Relative and Other Designated Caregiver payment set at half the foster care rate, provided household income does not exceed 300% of the federal poverty level. Kinship caregivers can also access one-time placement assistance and reimbursement for the costs of becoming a verified foster home. Those who complete full verification receive the standard foster care rate.²⁰

At the federal level, the Guardianship Assistance Program under Title IV-E provides ongoing payments to relatives who assume legal guardianship of a child they previously fostered.²¹ A separate Kinship Navigator Program helps states and tribes connect kinship caregivers with services and financial aid.

If You Adopt or Take Guardianship

Foster parents who adopt a child from foster care with “special needs” (a designation that can include medical conditions, disabilities, age, sibling group status, or other factors making placement difficult) can receive ongoing monthly subsidies under the Title IV-E Adoption Assistance program.²²

Adoption subsidy amounts are negotiated individually and can go up to the state’s foster care maintenance rate for the child, including any specialized rate the child was receiving. Nationally, 88% of children adopted from foster care in a studied year received an adoption subsidy, with a median monthly payment of $444 and state-level medians ranging from $171 to $876.²³ Families can also receive a one-time reimbursement of up to $2,000 for adoption-related legal costs. Children receiving Title IV-E adoption assistance are automatically eligible for Medicaid, and that eligibility transfers across state lines.²⁴

Liability Protection and Free Training

Some support doesn’t appear as a payment on a schedule but has real financial value.

In Wisconsin, licensed foster parents are generally immune from civil liability for good-faith acts or omissions committed while acting as foster parents, or for damage caused by foster children in their care. The state also administers a Foster Parent Liability Insurance Program that reimburses foster parents for property damage or loss caused by foster children when private insurance doesn’t cover it.²⁵²⁶

Pre-service and ongoing training is provided free of charge in most states. Maryland requires 27 hours before licensure and 10 hours annually thereafter, all at no cost.⁸

How to Start Receiving Support

Getting any of this money starts with getting licensed. Licensing is managed by each state’s child welfare agency, generally called the Department of Children and Families, Department of Human Services, or something similar. The process typically involves an application, background checks for all household members, a home study, and required training. Training hours vary: Virginia requires 40 hours, North Carolina requires 30 (or 40 for therapeutic foster care), and Maryland requires 27.²⁷⁸

In Minnesota, prospective foster parents contact Foster Adopt Minnesota or their local county or tribal human services agency, then complete an application, background study, home study, and training before receiving a one- or two-year license. Payments flow through the Northstar Care for Children program once licensed.²⁸ In Florida, prospective parents can call the Foster Information Center at 1-833-678-3735 to start the process.²⁹

Once you’re licensed and a child is placed with you, payments begin automatically through the placing agency. One point worth keeping in mind: North Carolina’s guidance notes that foster care payments are strictly reimbursement for expenses, and applicants must show adequate income to support themselves independently of foster care payments.²⁷ Fostering isn’t structured to be a source of income, and states screen for that at the licensing stage.

1
HHS ASPE. Federal Foster Care Financing
2
ACF Children’s Bureau. Title IV-E Foster Care Eligibility Reviews Fact Sheet
3
Congressional Research Service. Child Welfare Funding in the President’s FY2027 Budget
4
Oregon Department of Human Services. Foster Care Rates
5
Washington DCYF. Foster Care Payment Levels
6
Missouri DSS. Financial Considerations – Payments for Children
7
Michigan DHHS. Children’s Foster Care Manual FOM 905-3
8
Maryland DHS. Resource Parent Manual
9
NYC Administration for Children’s Services. Special Medical Rate Policy
10
Wisconsin DCF. Uniform Foster Care Rate
11
Office of the Law Revision Counsel. 26 USC § 131 – Certain Foster Care Payments
12
IRS. Notice 2014-7
13
IRS. Child Tax Credit
14
Medicaid.gov. Medicaid and CHIP FAQs – Coverage of Former Foster Care Children
15
Juvenile Law Center. Medicaid to 26 for Former Foster Youth
16
SC DHEC. WIC Policy – Foster Children
17
Arizona DHS. WIC Benefits for Foster and Adopted Children
18
Illinois DHS. Foster Care and SNAP Policy
19
Maryland DHS. Kinship Care
20
Texas DFPS. Kinship Care
21
ACF Children’s Bureau. Kinship Care
22
ACF Children’s Bureau. Title IV-E Adoption Assistance
23
HHS ASPE. Understanding Adoption Subsidies
24
Families Rising. Eligibility and Benefits for Federal Assistance
25
Wisconsin OCI. Foster Parent Insurance
26
Wisconsin DCF. Foster Parent Liability Insurance Program
27
North Carolina DHHS. Foster Homes Licensing
28
Minnesota DCYF. Become a Foster Parent
29
Florida DCF. Foster Care