Grandparents who work and take care of children may qualify for earned income tax credit (EITC). So if you’re working and looking after your grandparents simultaneously, then you could claim these children for the EITC.
What is EITC?
EITC means Earned Income Tax Credit. This is a refundable tax credit. If you qualify for EITC and claim it, you could pay less tax or pay no tax. You may even get a tax refund.
EITC eligibility criteria for grandparents caring for grandchildren
- Your grandchild has a proper Social Security Number
- Your grandchild’s age is less than 19 years at the end of the tax filing year
- Your grandchild is younger than you at the end of the filing year
- Your grandchild was completely disabled at the end of the filing year
- Your grandchild was below 24 years and a full-time student at the end of the filing year
- Your grandchild has been living with you for more than 6 months in the US
- Your grandchild can’t file a joint return for the tax year unless
“the child and the child's spouse did not have a separate filing requirement and filed the joint return only to claim a refund.”
Can two people claim for the same child?
No. Not usually. Only one person can claim the child as a qualifying child for the EITC.
If a child is eligible for 2 people and one of them is a parent, then the non-parent can’t qualify for the EITC unless his/her annual gross income is more than the parent. If the child is eligible for another relative and the parent annual gross income is not applicable, the taxpayers choose. The IRS may also use the tiebreaker rules in these situations.
Tie breaker rules
The child is considered as a qualifying child only by:
- The parents if they file a joint tax return
- If one of the individuals is the child’s parent
- The parent with whom the child spent the longest time of the year. This happens when both the people are the child’s parent and they decide to not file income tax returns together
- The individual who has the higher annual gross income if parents can’t claim the child as a qualifying child
- The parent with the highest annual gross income if the qualifying child lived with each parent for the same tenure during the tax year, and they decide to not file jointly
Few tax facts grandparents should be aware of
- Grandparent may qualify for the EITC if he is working and has a grandchild living with him
- The grandchild must fulfill qualified child requirements for the EITC
- The EITC rules for both grandparents and parents are same
- The grandparent must have source of income from a job or self-employment
- It’s best to use the EITC Assistant to know if you qualify for the EITC
- Eligible grandparents should file a tax return even though they don’t owe tax
Special rules and restrictions
Earned Income Tax Credit - Rules for all
- Your AGI is less than $48,340 if you have 3 children ($53,930 for married filing jointly)
- Your AGI is less than $45,007 if you have 2 qualifying children ($50,597 for married filing jointly)
- Your AGI is less than $39,617 if you have 1 qualifying child ($45,007 for married filing jointly)
- Your AGI is less than $15,010 if you don’t have a qualifying child ($20,600 for married filing jointly)
- You have a valid Social Security Number
- You can’t file married filing separately
- You must be a US citizen
- Your investment income is is $3450 or less
- You have earned income
- You can’t file form 2555-EZ or 2555
Earned Income Tax Credit - When you have a qualifying child
- The child must fulfill the relationship, age, residency, and joint return requirements
- Only one person can claim EITC for the qualifying child
- You can’t be a qualifying child of another individual
Earned Income Tax Credit - When you don’t have a qualifying child
- You should be at least 25 years or below 65 years
- You have lived in the US for more than half of the year
- You’re not allowed to be a qualifying child of another individual
- You’re not the dependent of another individual
Special rules for individuals receiving disability benefits
IRS regards disability retirement benefits as Earned Income Tax Credit till you attain the minimum retirement age. This refers to the age you could have received a pension if you were not disabled.
After you attain the minimum retirement age, the IRS regards the payments as a pension. They are not regarded as earned income.
Benefits like SSI, SSDI, and military disability pensions are not regarded as earned income. You can’t use them to claim the EITC. You may qualify for the credit under the following circumstance:
You and your spouse file a joint return and have other earned income.
For more information, look at IRS disability and earned income tax credit page.