Can a Grandmother Take the Earned Income Credit for a Grandchild?

If you’re raising your grandchildren, you aren’t alone. In fact, 2.7 million grandparents are raising grandchildren, which is great for bonding time with the little ones, but not so great on the bank account. For those grandparents who are living on a reduced income, that strain can be especially noticeable. That makes it all the more important that grandparents realize the tax credits they can take as a result of raising their grandchildren. One of the biggest is the Earned Income Tax Credit, or EIC, which offers relief to those with qualifying income that have a child in residence.

What Is the EIC?

The EIC is designed to help working adults who earn a low to moderate income. To qualify, you must either have a qualifying child or be between the ages of 25 and 65 and have an income that falls below the maximum. For grandparents whose grandchildren live with them most of the year, the EIC can be an option while filing taxes.

Qualifying Grandparents

For retired grandparents, the “earned income” part of the credit may be problematic. In order to qualify, you must have worked for someone else or run your own business. In doing so, though, you can’t bring in more than the upper limit required for your filing status. Those limits vary from $40,000 to $55,000 from one year to the next, depending on your marital status and how many children you’re claiming. Earned income includes wages, tips, union strike benefits and long-term disability benefits as long as you began receiving them before reaching retirement age. If you’re self-employed, you’ll qualify if you own a business or farm, you are a minister or you receive a Form W-2 with the box “statutory employee” checked. If you invest money that will be limited as well, since your investment income must be $3,500 or less to qualify for the EIC.

Amount of Credit

The amount of credit you’ll earn changes slightly each year, but it’s worth noting how much you’ll get before you file your taxes. The highest credit is for those with three or more qualifying children, bringing you $6,431 in 2018. If you have two children living with you, that amount drops to $5,716 and $3,461 with only one child.

The Qualifying Child

The EIC applies to parents, stepparents, foster parents and adopted parents. It also applies to the grandparents of those children. In order to claim the child for EIC purposes, the grandchild must be below the age of 19 or under 24 if the child is still in school. A permanently and totally disabled grandchild can be claimed at any age. However, to qualify, the grandchild must live with you more than half of the tax year in question. You’ll also need to coordinate with the parents of your grandchild since only one person can claim a child per tax year. This means if the child splits time between you and a parent, you’ll need to come to an agreement. In the event of a tiebreaker, the IRS goes with the caregiver who has the highest adjusted gross income.

Other Tax Breaks

In addition to EIC, you may also qualify for tax breaks such as head of household filing status, which lowers your taxable income, and deductions for expenses like education, child care and medical and dental expenses. You may also be eligible for the child tax credit, which was doubled to $2,000 per child in late 2017, with $1,400 of that amount being refundable. This change is in effect until 2025 and the child must have lived with you for more than half the tax year to qualify.

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About the Author

Stephanie Faris is a novelist and freelance writer whose work has appeared on the websites of Pacific Standard, the New York Post, the Intuit Small Business Blog, and many others. She is the Simon & Schuster author of eight children’s novels, including the Piper Morgan series.

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