Foster Youth Tax Credit
For taxable years beginning on or after January 1, 2022, California allows a refundable Foster Youth Tax Credit (FYTC). (R&TC Section 17052.2, approved by the governor June 30, 2022) To qualify for the credit, an individual must:
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Have been in foster care while age 13 or older and placed through the California foster care system,
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Be age 18 or older but not more than 25 on the last day of the tax year
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Be allowed the California EITC for the year the credit is claimed, and
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Satisfy foster care verification requirement.
If otherwise qualified, the credit will be available to undocumented persons. (R&TC Sec. 17052.2)
The maximum amount of the FYTC, initially set at $1,000, will be indexed for inflation in the same manner as the income tax brackets.
For the 2024 taxable year, the maximum amount of credit allowable for each eligible taxpayer is $1,154 (up from $1,117 in 2023). The credit amount phases out as earned income exceeds the threshold amount of $26,626 and completely phases out at $31,951.
The FYTC will be operative only for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the earned income tax credit. (R&TC Sec. 17052.2(b)) The purpose of the Foster Youth Tax Credit is to reduce poverty among California's young adults who have been in the foster care program. The FTB will be required annually to prepare a written report to the legislature that provides the number of tax returns claiming the credit and the average amount of the credit.