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

If your grandchild lived with you for most of the year, you may be able to claim the earned income credit for the child on your tax return. Even if one of the parents can claim the child, it is often more advantageous (and perfectly legal) for the grandmother or grandfather to claim the child when they have more income. Several factors must be taken into consideration.

Relationship and Residency Tests

The IRS allows you to claim the earned income credit for a son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. This covers all grandchildren, even step-grandchildren or adopted grandchildren who are not related to you by birth.

Residency Test

The grandchild must have lived with you in the United States for more than half the year. If you are filing a joint return, you can include the time the grandchild lived with your spouse.

Age and Joint Return Tests

The child must be under age 19 at the end of the tax year, or or under 24 if he is a full-time student at an accredited educational institution such as a college, vocational school or high school. Also, if the child is married, he cannot have filed a joint tax return except to recover withheld wages.

Qualifying Child of More Than One Person

In many cases, more than one person in a household qualifies to claim the earned income credit. In these cases, the parties can decide who will claim the credit. For example, the grandmother and mother both live in the same house with the child, and they both qualify to claim the child for earned income credit. If the grandmother has a higher adjusted gross income than the mother, the mother can agree to let the grandmother claim the credit. However, the mother will not be able to claim the child as a dependent or claim other credits for the child. The grandmother can claim the dependent exemption and other child credits if she meets the separate qualifications.

Tie Breakers

If two people claim the same child for earned income credit, tie-breaker rules take effect. The parent always has the first right to take the credit. If the dispute is between two relatives who are not parents, the credit goes to the one with the higher AGI. In cases in which two people claim the same child for earned income credit, the IRS will first ask both parties to supply documents such as school or doctor records that prove the child lived with the taxpayer for more than half the year.

Earned Income

To claim the earned income credit at least part of your income has to come from working. Wages, salaries, tips, self-employment income and certain disability pensions all count as earned income. You cannot count investment income, Social Security payments, IRA distributions or retirement pensions as earned income.

Maximum Income Limits

Your earned income and adjusted gross income must both be under $36,050 (as of 2012) if you are single or head of household to claim the earned income credit with only one qualifying child. If you are married filing jointly, you total earned income or AGI must be under $41,100. For two qualifying children, the maximum income limits are $40,950 (single) and $46,000 (married.) If you have three or more qualifying children, the limits are $43,950 (single) and $49,078 (married.)

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About the Author

Alan Sembera began writing for local newspapers in Texas and Louisiana. His professional career includes stints as a computer tech, information editor and income tax preparer. Sembera now writes full time about business and technology. He holds a Bachelor of Arts in journalism from Texas A&M University.

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