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Raising a grandchild can cause financial strain, but grandparents should be aware that there is a tax credit available that could help them out. Working grandparents who are supporting their grandchildren may qualify for the earned income tax credit, which can significantly reduce the amount of taxes they pay or even allow them to receive a refund.
The earned income tax credit is a benefit for working people with low to moderate incomes and dependents, and this includes grandparents. Taxpayers who do not have a dependent may also qualify, but the process is a bit more difficult.
In order to claim the tax credit, you must be raising a child who meets the following criteria:
- Is the child your son, daughter, adopted child, stepchild, foster child, brother, sister, half brother, half sister, step-sister or a descendent of any of them, such as a grandchild or niece or nephew?
- Is the child younger than 19 at the end of the year, younger than 24 and a full-time student at the end of the year, or any age and permanently and totally disabled?
- Did the child live with you for more than half the year?
Additionally, to qualify for the tax credit, your income must be below certain limits, depending on how many dependents you have. The limits for 2019 are as follows:
- One child. Filing as an individual, your income must be less than $41,094. Filing jointly, your income must be less than $46,884.
- Two children. Filing as an individual, your income must be less than $46,703. Filing jointly, your income must be less than $52,493.
- Three or more children. Filing as an individual, your income must be less than $50,162. Filing jointly, your income must be less than $55,952.
The maximum amount of the tax credit you can receive also depends on how many dependents you have. In 2019, the following are the maximum credit amounts:
- $6,557 with three or more qualifying children.
- $5,828 with two qualifying children.
- $3,526 with one qualifying child.