Payments you receive for providing care to foster individuals generally are not included in your income. However, you must include payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. See below for details.

Per IRS Publication 525 Taxable and Nontaxable Income, page 31:

Foster care providers. Generally, payment you receive from a state, political subdivision, or a qualified foster care placement agency for caring for a qualified foster individual in your home is excluded from your income. However, you must include in your income payment to the extent it's received for the care of more than 5 qualified foster individuals age 19 years or older.

A qualified foster individual is a person who:

1. Is living in a foster family home, and
2. Was placed there by:
   a. An agency of a state or one of its political subdivisions, or
   b. A qualified foster care placement agency.

Difficulty-of-care payments. These are payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in the foster care provider's home in which the qualified foster individual was placed.

You must include in your income difficulty-of-care payments received for more than:

1. 10 qualified foster individuals under age 19, or
2. 5 qualified foster individuals age 19 or older.

Maintaining space in home. If you're paid to maintain space in your home for emergency foster care, you must include the payment in your income.

Reporting taxable payments. If you receive payments that you must include in your income and you are in business as a foster-care provider, report the payments on Schedule C or Schedule C-EZ (Form 1040). See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home.

If, based on the information above, you need to report Schedule C income for your foster care business, you can enter this in the TaxAct program as follows:

1. From within your TaxAct return (Online or Desktop) click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal 
2. Click Business Income in the Federal Quick Q&A Topics menu to expand the category and then click Business income or loss from a sole proprietorship
3. Click New Copy of Federal Schedule C (Desktop users click Add) to create a new copy of the form or Review to review a form already created