The Internal Revenue Service wants working grandparents raising grandchildren to be aware of the Earned Income Tax Credit (EITC) and correctly claim it if they qualify.
What is the EITC?
The EITC is a federal income tax credit for workers who don’t earn a high income ($53,505 or less for 2016) and meet certain eligibility requirements. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund. The EITC could put an extra $2 or up to $6,269 into a taxpayer’s pocket.
Are grandparents eligible?
Grandparents and other relatives care for millions of children, but are often not aware that they could claim the children under their care for the EITC. A grandparent who is working and has a grandchild who is a qualifying child living with him or her may qualify for the EITC, even if the grandparent is 65 years of age or older. Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency requirements.
Do any special rules apply?
Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC. There are also special rules for individuals receiving disability benefits and members of the military.
Working grandparents are encouraged to find out if they qualify for this very important credit. To qualify for EITC, you must have earned income either from a job or from self-employment and meet basic rules. Also, certain disability payments may qualify as earned income for EITC purposes. EITC eligibility also depends on family size.