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California’s New Foster Care Tax Credit

Free Money for Transition-Age Youth

In recent years, California has launched an innovative refundable tax credit. It is aimed at improving economic opportunity and financial stability for current and former foster youth. Known as the Foster Youth Tax Credit (FYTC), this state-level benefit. This credit helps young adults (ages 18-25) who have spent part of their lives in foster care gain financial relief as they enter adulthood.

What Is the Foster Youth Tax Credit?

This is a refundable state income tax credit available in California to qualifying current and former foster youth. Unlike some credits that merely reduce your tax liability, refundable credits can result in a cash refund. This means taxpayers may receive money back even if they owe no state tax.

Under the credit’s current design:

  • Eligible individuals can receive up to about $1,189 for the 2025 tax year. It jumps to $2,378 for couples filing jointly if both spouses qualify.
  • The credit amount has increased over time from initial levels (about $1,083 in earlier years) as the program has matured.

This credit joins other refundable credits — including the California Earned Income Tax Credit (CalEITC) and the Young Child Tax Credit. It is aimed at low-income Californians and families.

Who Qualifies?

To claim the Foster Youth Tax Credit, an individual must meet several criteria:

  1. Age: Be between 18 and 25 years old at the end of the tax year.
  2. Foster Care Experience: Have been in foster care on or after their 13th birthday, as part of the California foster care system.
  3. CalEITC Eligibility: Qualify for the California Earned Income Tax Credit (CalEITC). This means earning income and staying within the CalEITC income limits.
  4. Verification: Provide evidence of foster care status through consent to data verification, a formal verification letter, or other acceptable documentation when filing.

These rules reflect the state’s focus on assisting young adults who face a particularly challenging transition to financial independence without the typical family supports many peers rely on.

How to Claim the Credit

Eligible taxpayers claim the Foster Youth Tax Credit on California tax form FTB 3514 (the CalEITC form). Follow instructions through tax preparation software or with help from tax assistance programs.

Because eligibility depends on foster care verification, many tax preparers and outreach organizations work with beneficiaries to gather the proper documentation and confirm eligibility before filing.

Why It Matters

California’s Foster Youth Tax Credit is more than a line item on a tax return. It represents a strategic anti-poverty investment in a population that historically has faced elevated risks of financial instability, housing insecurity, and employment challenges after aging out of the foster care system.

According to analyses of the program’s early years:

  • The credit has already funneled millions of dollars directly into the hands of young Californians. Over three years, the refundable credit delivered more than $17 million to over 16,000 current and former foster youth.
  • For many recipients, this additional income — often received as a refund — can make a meaningful difference in covering basic needs such as rent, transportation, education costs or job-related expenses.

The program’s success has also spurred related legislative efforts to expand outreach and support. For example, requiring welfare and probation departments to inform eligible foster youth about the credit and tax filing assistance.

A Model for State-Level Tax Policy

California’s Foster Youth Tax Credit is one of the first credits of its kind in the United States, reflecting a policy approach that blends tax relief with social support for vulnerable young adults. It builds on longstanding state efforts to leverage tax policy as a tool for equity and anti-poverty outcomes.

For foster youth and advocates alike, the credit represents not only financial support, but also a recognition of the unique challenges foster youth face — and a tangible commitment by the state to help them thrive as they transition into independent adulthood.