Tax Credits for Grandparents Raising Grandchildren

Caring for a child is an expensive taking. Just like a parent, a grandparent who raises his grandchildren typically incurs expenses for food, clothing, medical care and other necessities. To compensate for these costs, the Internal Revenue Service offers certain tax benefits, including credits and deductions, to grandparents who care for their grandchildren.

Qualifying Children

If you are raising a grandchild, you can qualify for certain tax credits only if the grandchild is your qualifying child. To be your qualifying child, your grandchild must live with you for more than half of the days in the year, and he must provide less than half of his own financial support. He must also be under age 19 at the end of the tax year, or he must be a student under age 24.

Child Tax Credit

The child tax credit provides you with a credit of as much as $1,000 for each grandchild who meets the requirements, depending on your adjusted gross income and the amount of tax you owe. To claim the child tax credit for a grandchild, the grandchild must be a qualifying child who was under age 17 when the tax year ended. You must also be claiming the child as a dependent on your tax return.

Child and Dependent Care Credit

If the grandchild you are raising is under age 13, you may be able to claim the child and dependent care credit. For you to claim this credit, your grandchild must be a qualifying child and you must have paid child-care expenses so that you or your spouse could earn income. If you qualify for this credit, you can reduce your owed tax by up to 35 percent of the expenses you pay. The exact percentage of expenses you can claim depends on your adjusted gross income.

Deductions

In addition to tax credits, grandparents raising their grandchildren can also claim deductions to lower their taxable income. For example, if you claim your grandchild as a dependent, you can claim a dependent exemption. For the 2012 tax year, each exemption reduces your taxable income by $3,800 (rising to $3,900 for the 2013 tax year). Grandparents may also be able to deduct a grandchild's medical expenses, dental expenses or tuition and fees paid for higher education.

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About the Author

Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.

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