The bond between grandmother and grandchild often extends beyond a familial tie into the territory of financial responsibility. And if you’re a grandmother with a limited income, caring for your grandchild’s needs can be challenging. The Federal Earned Income Credit (EIC) is a refundable tax credit for wage earners who have low to moderate incomes. Even if you don’t owe any taxes, you may still qualify to receive EIC money. The IRS reports that nearly 27 million taxpayers received more than $65 billion as EIC in 2017 alone.
A grandmother can take the Earned Income Credit if she meets certain income limits; if her grandchild meets the guidelines for a “qualifying child;” and if nobody else can claim the credit for her grandchild.
Claiming Grandchildren on Your Taxes
Before claiming grandchildren on your taxes, you must first satisfy the “earned income” part of the EIC. This means that your qualifying income must come from sources such as wages, salary, tips, self-employment net earnings or statutory employee gross income. Importantly, all your earned income must be taxable income. You can’t use nonqualifying unearned income, which includes interest, dividends, pensions and annuities.
Next, your grandchild must have a Social Security number and meet the definition of a “qualifying child.” The IRS lists qualifying child rules, including the requirement that your grandchild must live with you for more than half of the tax year. At the end of the tax year, your grandchild must be younger than 19 years or younger than 24 if the grandchild is a full-time student.
Some Notable Exceptions to EIC
- If you're married, you must file a joint tax return with your spouse to qualify for the EIC benefit.
- If your grandchild also meets the guidelines as a qualifying child for one or both parents, you can only claim the EIC if your adjusted gross income is higher than the parent(s). The IRS allows an exception to the taxable-income-only provision. If you have nontaxable combat pay, you can include it with your earned income.
- There is now a way for you to claim the EIC for a permanently and totally disabled grandchild. Your grandchild's physical or mental disability must be assessed by a doctor as having lasted (or will last) for at least a year or until your grandchild's death.
- As of May 2018, the IRS lists 26 states plus the District of Columbia as local governments that also provide EIC benefits. Check with your state to see if you may also qualify for this credit.
2018 EIC Tax Law
As a grandmother, in order to claim dependent grandchildren on your 2018 tax return, you must file IRS Form 1040. You must also attach a completed Schedule EIC to your tax return.
If you're single, head of household or widowed, your adjusted gross earned income must be less than $40,320 (claiming one grandchild), less than $45,802 (claiming two grandchildren) or $49,194 (claiming three or more grandchildren).
If you're married, filing a joint return with your spouse, your adjusted gross income must be less than $46,010 (claiming one grandchild), less than $51,492 (claiming two grandchildren) or $54,884 (claiming three or more grandchildren).
The maximum amount of EIC you can receive is $3,461 (one qualifying grandchild), $5,716 (two qualifying grandchildren) or $6,431 (three or more qualifying grandchildren). Note that you may not receive the maximum amounts.
2017 EIC Tax Law
If you were single, head of household or widowed in 2017, your adjusted gross earned income must be less than $39,617 (claiming one grandchild), less than $45,007 (claiming two grandchildren) or $48,340 (claiming three or more grandchildren).
If you were married, filing a joint return with your spouse in 2017, your adjusted gross income must be less than $45,207 (claiming one grandchild), less than $50,597 (claiming two grandchildren) or $53,930 (claiming three or more grandchildren).
The maximum amount of EIC you can receive for the tax year 2017 is $3,400 (one qualifying grandchild), $5,616 (two qualifying grandchildren) or $6,318 (three or more qualifying grandchildren). Note that you may not receive the maximum amounts.
- IRS: Qualifying for the Earned Income Tax Credit
- IRS: Publication 596 - Earned Income Credit (EIC)
- IRS: Qualifying Child Rules
- IRS: Do I Qualify for EITC?
- IRS: States and Local Governments with Earned Income Tax Credit
- IRS: About Schedule EIC (Form 1040), Earned Income Credit
- IRS: 2019 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates
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