Every family’s circumstances are different. Sometimes, grandparents find themselves in the role of primary caregiver for their grandchildren. In this case, you’ll be pleased to know that the IRS does allow for grandparents to claim their grandchildren on income taxes, given specific criteria are met. The IRS lets taxpayers claim any qualifying relative or child as a dependent on their tax returns.
TL;DR (Too Long; Didn't Read)
There are a series of tests the IRS uses to determine whether or not someone qualifies as your dependent and is a qualifying relative. If you are able to claim your grandchild as a dependent on your taxes, you may also be eligible for certain tax credits.
Claiming Grandchildren on Your Taxes
According to the IRS, a qualifying relative is someone who is able to be claimed as a dependent based on IRS tests. Contrary to popular belief, a qualifying relative does not have to be a person who is a blood relative of yours. As long as you provide for the majority of your grandchildren’s living expenses, and they meet other qualifications that determine if they are a qualifying child or relative, then you may be eligible to claim them. Also, both qualifying children and qualifying relatives can be dependents.
If you claim dependents such as your grandchildren on your taxes, you must prove that they live with you and that you provide for the majority of their care. Given other criteria are met, such as residency, citizenship and income limitations, you are then able to claim your grandchildren as qualifying children or qualifying relatives as well. While there are age limitations for claiming qualifying children as dependents (unless they are permanently and totally disabled), there are no age restrictions for qualifying relatives. For more information, visit the IRS' website and read IRS Publication 929, Tax Rules for Children and Dependents for an explanation of all the tests and income requirements that determine someone's status as a qualifying relative or a qualifying child.
When you're able to claim your grandchildren on your taxes, you may be eligible for certain tax credits and deductions. First, you are able to claim an exemption for each of your grandchildren through tax year 2017. You can also claim head of household filing status, deductions for their medical and dental expenses as well as credits or deductions related to qualified education expenses. You may possibly qualify for the earned income tax credit, the child tax credit and the child and dependent care credit if you meet all of the eligibility requirements for each. If a grandparent is working and paying for child care, the IRS may allow the grandparent the child care tax credit.
The IRS’ website has interactive tax assistant tools that not only can help you figure whether you qualify for certain credits or deductions, but also assist you in determining the eligibility of your qualifying relative or child.
Exceptions and Complications
Because the IRS’ rules are very specific and ever-changing, it is best to consult with a qualified tax preparer or accountant who can help guide you through the ins and outs of claiming your grandchildren on your income taxes. Your tax preparer will determine your grandchildren’s eligibility as well as inform you of which tax credits and deductions you qualify for. As a grandparent caring for grandchildren, the IRS does help you shoulder some of the costs associated with caring for dependents, and taking the time to learn everything you qualify for could lower your tax obligation, or even land you a refund at tax time.
Dependents and 2018 Tax Changes
As part of the 2018 tax law changes, the personal exemptions that taxpayers were able to claim for themselves and on behalf of dependents are being eliminated. On the other hand, standard deductions and child tax credits are increasing.
Specifically, the child tax credit is doubling from $1,000 to $2,000. The child care tax credit is remaining unchanged.
Dependents Under 2017 Tax Law
Under 2017 tax rules, when you claim a dependent, you receive a $4,050 personal exemption which is essentially a tax deduction for each dependent. On the other hand, the child tax credit is only $1,000 for 2017, and the standard deduction amount for the taxpayer himself or herself is lower.
- Accounting Web: Tax Breaks for Grandparents Raising Their Grandchildren
- IRS: Working Grandparents May Be Eligible for EITC
- Efile: How to Claim a Qualifying Relative as a Dependent
- IRS: Table 2: Dependency Exemption for Qualifying Relative
- IRS: Publication 929, Tax Rules for Children and Dependents
- IRS: Do I Qualify for EITC?
- The CPA Journal: Tax Implications (and Rewards) of Grandparents Taking Care of Grandchildren
- The Motley Fool: Your Complete Guide to the 2018 Tax Changes
- Journal of Accountancy: Child Tax Credit Now Higher, More Widely Available
- Forbes: IRS Announces 2017 Tax Rates, Standard Deductions, Exemption Amounts And More
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