Income Tax Information
Paragraph 81 (1) (h) of the Income Tax Act excludes certain social assistance payments from a recipient’s income. On April 26th, 1999 the Canada Customs and Revenue Agency published Income Tax Technical News No. 17, which clarified the position of the CCRA when social assistance payments are made through a non-profit organization to an individual who is responsible for a foster home.
Subclause 60(3) Income Tax Act 81 (1) (h)
New paragraph 81 (1) (h) of the Act specifically exempts from income social assistance payment made to an individual for the benefit of a foster person (child or adult) under the individual’s care where the individual and the foster person reside together in the individual’s principal place of residence. The exemption also applies to amounts (often called “bed reservation fees” paid to individuals to maintain their residence available for use by a foster person. This amendment which clarifies the scope of previous amendments made to paragraph 56 (1) (u) of the Act applies to the 1982 and subsequent taxation years.
This describes how the income tax exemption applies to foster care providers. Section 81 of the Income Tax Act lists various amounts that are not included in computing a taxpayer’s income. In general, paragraph 81(1)(h) exempts from income social assistance payments 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. The income tax exemption applies to an amount received by the Caregiver when all of the following conditions apply:
- The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test.
- The payment is made under a program provided for by a federal, provincial or territorial law.
- The payment is received directly or indirectly by the Caregiver for the benefit of the Cared-for individual.
- 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.
- 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.
- 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 for which the payment is made.
*April 2008 – New Information on Paragraph 81 (1) (h) of the Income Tax Act