Can Grandparents Claim Grandchildren on Their Taxes?

There are many write offs and income tax benefits when it comes to caring for and raising children, but usually it’s thought of for the parents to utilize these benefits. 

tax time

Can grandparents claim various tax credits? Yes – they can. 

There are various circumstances in which grandparents can claim their grandchildren on their taxes, and some situations may apply while others don’t. The important part is to figure out which areas work for you and which ones don’t. 

Let’s Start at the Beginning

Grandparents are able to claim their grandchildren on their taxes as dependents, provided that they meet the dependency requirements. 

As an added bonus, even if your grandchildren do not meet the dependency requirements grandparents could still claim them if they meet the qualifying relative criteria. 

Can Grandparents Claim Grandchildren Instead of the Parents?

The short answer to this question is yes. 

Now if you are married but filing separate returns from your spouse, you can claim them individually. However, if you file joint tax returns then your partner can also claim the grandchildren on their tax returns. 

This means that both of you, as grandparents, can claim your grandchildren on your taxes instead of their parents. This situation only applies, though, if you are the responsible adult for raising the children. 

You could have been appointed custody of your grandchildren via a court proceeding or the parents have voluntarily relinquished their parents rights. No matter how it happened, as long as you are the legal guardian of the children you can claim them on your taxes. 

What Are the Requirements to Claim Grandchildren on Your Taxes?

When a grandchild is a dependent, you can claim them on your income taxes as such. 

As long as your grandchild is a qualifying dependent, you will be able to claim them. So, what makes them a qualifying dependent?

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In order to be qualifying as a dependent, they must meet the following requirements 

  • They are related to you by law or blood either through birth, legal adoption or marriage
  • They must be younger than you (and your partner, if filing jointly) 
  • They cannot be claimed by another person as a dependent, unless that person is your spouse and you file your tax returns jointly 
  • They have to live with you for at least 6 months out of the year, unless there has been a reason that is approved by the IRS
  • They have to receive more than half their support from you for the year you’re filing taxes for 

There is another category for claiming grandchildren on your taxes. This category is known as being a qualifying relative. 

The criteria to meet this category is as follows 

  • They must live in your house for the whole year, or legally or blood-related to you 
  • They must have earned less than $4,300 for the tax year that you want to claim them on your taxes 
  • They must receive at least 50% of their support from you 
  • They must be a US resident

Why Claim Your Grandchild on Your Taxes?

When you’re helping to raise your grandchildren, or maybe you’re completely raising them on your own, there are a lot of benefits and tax write-offs that can help financially – even a little bit. 

If you are raising them, you should receive the benefits of doing so to help with that. There are numerous tax credits you could be eligible for, like the ones listed below. 

Child Tax Credit 

This benefit is available to families where the children have social security numbers. 

For grandparents claiming their eligible grandchildren, they could get up to $3,000 per child over 6 years old and up to $500 more per child if they are under 6. 

This credit is applicable to all children who are under 18 years old. However, for families to be earning this credit, there is an upper maximum on the amount of income they can earn. 

Depending on your filing status, the income cut off will be between $75,000 and $150,000 annually. 

Child and Dependent Care Credit 

If you spend money caring for your grandchildren then you could also be eligible for this tax credit. 

This credit can give up to $8,000 for one qualifying dependent per year, or up to $16,000 for two or more qualifying dependents. 

Like many other tax credits, there is an income cut off where you can no longer receive this credit. In order to qualify for this one, your gross-adjusted income must be less than $438,000 annually. 

Earned Income Tax Credit (EITC)

The EITC is usually available for low- and middle-income families. You can qualify for this tax credit if you are raising your grandchildren – even if you are over the age of 65. 

In order for you to be eligible for the EITC, your grandchildren must meet the qualifying criteria for a dependent or relative. Additionally, you must have earned some kind of income, either as an employee or a self-employed individual. 

Earned Income Tax Credit

Finally, even if you don’t owe anything on your taxes you must have filed a tax return to get this credit. 

Medical Expenses Deduction 

When it comes to taking care of your grandchildren, the medical expenses can really start to add up – especially if there is an ingoing condition requiring treatment. 

If the amount you spend in medical expenses exceeds 10% of your adjusted gross income then you may be able to have a write-off. Now, you’ll only be able to write off the amount that is over and above that 10% threshold, so you can still write something off but not all the expenses. 

In order to really get this advantage, though, you will need to make sure you keep track of the medical expenses involved for your grandchild. Itemize absolutely everything, and keep all receipts and bills. 

Educational Tax Breaks

Getting an education can set up your grandchildren for a really fantastic life, and you want the very best things for your grandchildren. 

If you have taken out a loan to help them pay for their education, you can use this on your taxes. 

Each year, you can deduct up to $2,500 of the interest paid on that loan provided your gross adjusted income is less than $80,000 (or $160,000 if filing jointly).

There are two different educational tax credits: The American Opportunity Tax Credit and The Lifetime Learning Credit. 

You cannot use both of these credits in the same tax year, so it’s important to determine which one will benefit you the most. One of the best things about these two credits is that they phase out at higher incomes so there’s more room to be able to use them. 

Additionally, tuition, books and other supplies can all count towards these credits. 

There are different situations that apply to these credits, which is why it’s in your best interest to take some time and figure out which one you would benefit most from before trying to use one of them. 

Additionally, if you contribute towards a 529 for your grandchildren this can help you too. This education savings plan can be tax-deductible for your state level taxes. 

These plans give you the benefit of tax-free growth on any investment you make as well as tax-free withdrawals your grandchildren will benefit from when it comes time for them to go to school. 

In Summary

Raising children is expensive, no matter who is raising them. From clothing to food, medical expenses and extracurricular activities – all of it can add up so quickly. 

For grandparents raising their grandchildren, their working years are over – or at least the majority of their working years are over. Their income may be limited an they want to make sure they have enough to survive for the remainder of their life. 

This isn’t to say they don’t want to raise their grandchildren, or that they don’t love them. 

If parents can get tax deductions and benefits from raising their children, why shouldn’t grandparents if they are the ones raising them?

It’s important to remember that children can only be dependents for one person (or spouses if you’re filing jointly), so if your adult children are claiming them then you cannot. 

However, if you are legally the guardian for these children it is you who should be claiming them as dependents or relatives. 

For tax planning purposes, you may want to have a discussion with your accountant to make sure you’re getting the most out of these benefits. 

Accountants know the laws, and can also help make sure that you have what you need and you qualify for that various tax credits. 

Raising your grandchildren can be really difficult: you’ve already raised your own children and you were looking forward to enjoying your retirement years. With the right financial planning and tax planning you can make sure you make the most of the credits available to you. 

Make an appointment with your accountant and financial planner, and check in regularly to make sure you know exactly what’s going on. New tax credits come out all the time so it’s very possible that there will be something available this year that wasn’t last year.