Right now, about 6.5 million children in the United States live with at least one grandparent instead of a parent. This means roughly 9% of all kids in America depend on their grandparents for support. The question of whether you can claim your grandchild for the Child Tax Credit (a big break on your taxes) can feel confusing and stressful. Many grandparents miss out on money they deserve because they do not understand the rules. Understanding these rules saves you hundreds, sometimes thousands, of dollars.
What you will learn in this article:
🎯 How the Child Tax Credit works and if your grandchild qualifies
🎯 The seven tests your grandchild must pass to get you the credit
🎯 How to handle tricky situations when other family members claim the same grandchild
🎯 Common mistakes that get claims denied and how to avoid them
🎯 Special rules for divorced parents and custody arrangements
Understanding the Child Tax Credit Basics
The Child Tax Credit is federal money the government gives back to you if you meet certain rules. For 2025, you can get up to $2,200 for each grandchild who qualifies. This amount goes into your pocket—either by reducing what you owe in taxes or by getting money back as a refund. If you work and earn money, you can get up to $1,700 back as a refund even if you do not owe any taxes at all.
Think of it this way: raising a child costs money. The government knows this, so they created this credit to help people raising kids. Whether you are a parent, a grandparent, or another relative, the same rules apply to everyone. The government does not care about your relationship to the child—they only care that you meet their list of requirements.
The <a href=”https://www.irs.gov/credits-deductions/individuals/child-tax-credit”>Child Tax Credit falls under Section 32 of the tax code</a> and is managed by the Internal Revenue Service (IRS). Changes to this credit happen often when Congress passes new laws. For the 2025 tax year (when you file in 2026), the credit is higher than it was before.
What Changed in 2025 for the Child Tax Credit
Starting in 2025, the government increased the maximum credit from $2,000 to $2,200 per child. This is the biggest change in several years. The <a href=”https://www.jacksonhewitt.com/tax-help/tax-tips-topics/family/child-tax-credit-2025/”>refundable portion (the money you get back) is up to $1,700</a>. This means even if your entire tax bill is zero, you can still receive up to $1,700 per grandchild.
But there is a catch: your income matters. If you make too much money, the credit gets smaller. The credit starts to shrink when your income goes above $200,000 if you are single or above $400,000 if you are married and file together. For every extra $1,000 you earn past these limits, you lose $50 in credit.
You also need to have earned income to get the refundable part. “Earned income” means money you make from working, not money from retirement accounts, pensions, or investments. This is critical for grandparents who are retired. A retired grandparent who lives only on Social Security and retirement money cannot get the refundable $1,700 back, but they can still get the nonrefundable $500 credit.
The Seven Tests Your Grandchild Must Pass
To claim your grandchild for the Child Tax Credit, your grandchild must pass all seven tests. If your grandchild fails even one test, you cannot use this credit. Missing any single requirement means the IRS will deny your claim.
Test One: Age Test
Your grandchild must be under 17 years old at the end of the tax year. This means on December 31 of that year, your grandchild must not have reached their 17th birthday yet. If your grandchild turns 17 on December 31, they no longer qualify that year. The day matters—it has to be before their 17th birthday to count.
If the grandchild is permanently and completely disabled (meaning they cannot work because of a physical or mental condition that will last their whole life), there is no age limit. A disabled grandchild of any age can qualify.
Test Two: Relationship Test
Your grandchild must be your grandchild. This sounds simple, but it means the child has to be a biological grandchild, an adopted grandchild, or a step-grandchild. <a href=”https://www.law.cornell.edu/uscode/text/26/152″>Under IRS Section 152</a>, you can also claim other descendants like great-grandchildren, as long as they are related to you by blood, marriage, or adoption.
The law is actually more flexible here than people think. You do not have to have formal custody or a court order. The government just wants proof of the relationship. A birth certificate works great. If you adopted the child, adoption papers work. Stepchildren also count because they became related through marriage.
Test Three: Support Test
You must provide more than half of your grandchild’s living costs during the year. “Living costs” means food, housing, medical care, education, and other everyday expenses. If your grandchild spends half their money and you spend half their money, that does not work—you have to pay for more than 50%.
Let’s say your grandchild needs $10,000 a year to live. You must pay more than $5,000 of that. If you pay exactly $5,000, you fail this test. This test trips up many grandparents because they assume child support from a parent counts toward their half. It does not matter who else pays—only what you pay counts.
Keep receipts and records of what you spend. Doctors’ bills, school supplies, grocery store receipts, and utility bills all count. When the IRS audits your return, they will ask for this proof.
Test Four: Dependent Test
You must claim your grandchild as a dependent on your tax return. This is not automatic—you have to actually file your taxes claiming the child as your dependent. If you do not file a tax return at all, you cannot get this credit. If you file a return but forget to list the grandchild as a dependent, the credit is lost.
For a grandchild to count as a dependent in your claim, the grandchild must:
- Be your grandchild (check—we covered this)
- Be under age 19, or under age 24 if a full-time student, or permanently disabled (check—we covered age)
- Live with you for more than half the year (more on this below)
- Not provide more than half of their own support (more on this below)
Test Five: Citizenship Test
Your grandchild must be a U.S. citizen, U.S. national, or U.S. resident alien. The IRS is strict about this. Your grandchild cannot have just a Green Card application pending—they need an actual status. A child with an Individual Taxpayer Identification Number (ITIN) is not a U.S. resident alien for tax purposes and does not qualify for this credit.
<a href=”https://www.irs.gov/faqs/childcare-credit-other-credits/child-tax-credit/child-tax-credit-4″>An ITIN does not meet the citizenship requirement for the Child Tax Credit</a>. This is one of the most common reasons claims get denied. Families assume an ITIN is enough—it is not.
Test Six: Residency Test
Your grandchild must live with you for more than half of the tax year. “More than half” means at least 183 days out of 365 days (or 184 days in a leap year). The child does not have to live with you every single day, but the total days must add up to more than half the year.
There are important exceptions to this rule. If your grandchild is temporarily away from home for school, medical treatment, military service, or vacation, that absence does not count against you. A child at college still counts as living with you if the college is their temporary home. A child in the hospital counts as living with you—hospital stays do not break the rule.
<a href=”https://tcan.unl.edu/sites/unl.edu.cas.ccfl.vita/files/media/file/Dependents,%20Child%20Tax%20Credits,%20TY2023.pdf”>Temporary absences for illness, education, business, vacation, military service, institutionalized care for disabled children, or incarceration all have exceptions</a>. What matters is that the child’s main home is with you.
Test Seven: Income Test
Your modified adjusted gross income (MAGI) cannot exceed certain limits. For 2025, if you are single or head of household, your income limit is $200,000. If you are married filing jointly, your limit is $400,000. If you are married filing separately, your limit is $200,000.
If your income is below these limits, you get the full credit. If your income goes above these limits, the credit shrinks by $50 for every $1,000 of income over the limit. This reduction is automatic—the IRS calculates it for you.
Understanding your income is critical. MAGI includes your wages, self-employment income, investment income, and many other sources. It is not the same as your gross income from your W-2. Some income gets added back into MAGI even if it was not on your W-2.
The Three Most Common Scenarios for Grandparents Claiming Grandchildren
Scenario One: Grandparent Has Full Custody and Parents Are Out of the Picture
This is the most common situation. The parent abandoned the child, is incarcerated, or is completely unable to care for the child. The grandparent has taken the child into their home and provides everything. The child lives with the grandparent 365 days a year.
| What the Grandparent Does | What Happens with the Credit |
|---|---|
| Provides all support and has full custody of grandchild | Grandparent passes all seven tests and claims the full $2,200 credit |
| Is married and files jointly with spouse | Both spouses share the benefit on one return |
| Has income of $150,000 (single filer) | Gets the full $2,200—income is below the $200,000 limit |
| Grandchild has valid Social Security Number | All requirements met; credit is approved |
Real Example: Maria is 58 years old and has been raising her granddaughter since birth. Maria earns $70,000 a year as a nurse. Her granddaughter is 14, lives with Maria 100% of the time, and Maria pays for all expenses. Maria passes all seven tests. She gets the full $2,200 credit when she files her taxes. If Maria had earned income of at least $2,500, she could also get the additional $1,700 refundable credit—meaning she could receive money back from the government even if her tax bill was zero.
Scenario Two: Grandchild Lives with Grandparent and Parent, But Grandparent Provides Most Support
This happens when a parent is struggling and the grandparent helps by letting both the parent and grandchild live in the grandparent’s home. The parent might have low or no income, but the grandparent pays the rent, buys food, and covers expenses.
| What Actually Happens | What the Tax Rule Is |
|---|---|
| Parent lives in home but contributes little or nothing | Grandparent might still pass the support test if they pay more than half |
| Parent works part-time and contributes some money | Grandparent must still provide more than 50% of grandchild’s costs |
| Grandchild spends equal time between grandparent’s home and another relative’s home | IRS tiebreaker rules apply; person with higher income gets to claim credit |
| Grandchild receives child support from noncustodial parent | That child support counts toward the parent’s 50%, not the grandparent’s 50% |
Real Example: James and his daughter Sarah both live in James’s house with Sarah’s two kids. Sarah makes $25,000 a year. James makes $80,000. James pays the mortgage ($1,200/month), utilities ($300/month), groceries ($600/month), kids’ school costs ($200/month), and medical expenses ($150/month). That is roughly $2,450 per month for the household. Sarah contributes $1,000/month from her income toward household bills.
James pays 71% ($2,450 ÷ $3,450). Sarah pays 29%. James passes the support test. He can claim his grandchildren for the credit. His grandchildren live with him more than half the year. All tests are met.
Scenario Three: Grandchild Splits Time Between Grandparent and Parent Due to Custody Arrangement
The child’s parents are divorced or separated. The grandparent has the child part of the time (maybe weekends or summers), but the parent has the child the rest of the time. Only one person can claim the child for tax purposes—not both.
| Who Has Child | What Happens |
|---|---|
| Child lives with parent 200 days, grandparent 165 days | Parent has more than half; parent claims credit unless parent waives it using Form 8332 |
| Child lives with parent 182 days, grandparent 183 days | Grandparent has more days; grandparent can claim credit unless parent claims first |
| Child lives with each exactly 182.5 days (split evenly) | Tiebreaker rule: whoever has higher income gets to claim credit |
| Parent signs Form 8332 releasing rights to grandparent | Grandparent can claim credit even if parent had custody for more days |
Real Example: Emma’s grandchild lives with Emma from June through August (92 days), then goes to Emma’s daughter (the parent) from September through May (273 days). The parent has the child more than half the year, so the parent is the “custodial parent.” Emma cannot claim the credit unless the parent signs Form 8332 releasing the right to Emma.
But what if Emma’s daughter does not want to claim the credit? She can sign Form 8332, and Emma becomes eligible. Many parents do not claim the credit because they have no income or do not file taxes. When that happens, the noncustodial parent (grandparent) can step in.
The Tiebreaker Rules: What Happens When More Than One Person Could Claim the Child
The IRS has created special rules called “tiebreaker rules” to handle situations where multiple people could legally claim the same grandchild. These rules prevent chaos and confusion. If you and the grandchild’s parent both meet the seven tests, the IRS uses these rules to decide who gets to claim the child.
Here is how the tiebreaker rules work, in order:
First, check if any of the people claiming the child is the child’s parent. If a parent can claim the child, and the parent meets all the tests, the parent wins. The parent’s claim is superior to everyone else’s. Only if no parent files a claim can a grandparent claim the child.
Second, if both parents could claim the child but do not file jointly together, the parent with whom the child lived the longest wins. Count the number of nights the child spent with each parent. The parent who has the most nights gets to claim the child. This is the most important test.
Third, if the child lived with each parent for the same number of nights, the parent with the higher adjusted gross income (AGI) wins. AGI is your income on your tax return before deductions.
Fourth, if no parent qualifies to claim the child, then the person with the highest AGI among everyone trying to claim the child gets to claim them. This is where a grandparent could win—if the grandparent’s income is higher than anyone else’s.
<a href=”https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/qualifying-child-rules”>The IRS tiebreaker rules are binding and final once determined</a>. You cannot override them with an agreement unless you use Form 8332 (which we cover below).
Real Example: Tom’s grandchild is in custody with Tom’s daughter (the parent). The parent earns $30,000 per year. Tom earns $80,000 per year. The child lives with the parent 250 days and with Tom 115 days. Normally, the parent would claim the child because the parent has the custody (more days).
But Tom’s daughter does not want the credit—maybe she does not file taxes or wants to help Tom. She signs Form 8332. Now Tom can claim the child. The form is the key. Without Form 8332, Tom cannot claim the child even though he earns more. With Form 8332, he can.
The Role of Form 8332: Letting the Noncustodial Parent Claim the Child
<a href=”https://turbotax.intuit.com/tax-tips/family/what-is-form-8332-release-revocation-of-release-of-claim-to-exemption-for-child-by-c”>Form 8332 is called the “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent”</a>. In plain English, this form lets the person who has the child most of the time give up their right to claim the child on taxes. When they sign it, someone else (like the grandparent) can now claim the child.
This form is critical in custody situations. A divorce decree or custody order does not override the IRS rules. Even if a court says the noncustodial parent gets to claim the child, the IRS will not accept the claim without Form 8332. The IRS does not trust court orders for tax purposes—they only trust Form 8332.
How Form 8332 works:
The custodial parent (the one with the child more than half the year) must complete the form. They fill in:
- The child’s name
- The child’s Social Security Number
- The tax year(s) the release applies to
- Their own Social Security Number
- Their signature and date
The custodial parent can release the claim for one year, multiple years, or all future years. Many parents do this if they do not file taxes or do not want the credit for other reasons.
Once signed, the custodial parent must give the completed form to the noncustodial parent. The noncustodial parent then attaches it to their tax return when they file. Without attaching it, the IRS will not accept the claim.
Important warning: <a href=”https://www.taxact.com/support/21089/form-8332-release-of-claim-to-dependent-for-exemption”>If the custodial parent revokes (takes back) the release, they must file Form 8332 with Part II completed to show the revocation, and attach a copy to their own tax return</a>. This means if a parent signs Form 8332 but later changes their mind, they have power to take it back. The noncustodial parent cannot rely on Form 8332 forever unless it specifically says “all future years.”
What you give up when you sign Form 8332:
If the custodial parent signs Form 8332, they lose more than just the ability to claim the child as a dependent. They lose:
- The Child Tax Credit ($2,200 per child in 2025)
- The Additional Child Tax Credit (the refundable portion—up to $1,700)
- Head of Household filing status (if applicable)
- Child and Dependent Care Credit
But they do NOT lose:
- Earned Income Tax Credit (EITC)—they can still claim this
- Exemptions for support provided (in some cases)
This is why some parents hesitate to sign. They do not realize what they are giving up. A parent with low income who signs Form 8332 might lose $1,700 in refunds that could have supported their family. This should be decided carefully, probably with a tax professional’s help.
Married Filing Separately: Special Rules for Grandparents Who Are Married
When you are married, you have choices about how to file. Most married couples file jointly, which means both spouses share the tax benefits. But some married couples file separately. If you and your spouse file separately, only one of you can claim the grandchild for the Child Tax Credit, even though you both live with the grandchild.
<a href=”https://www.hrblock.com/tax-center/filing/credits/child-tax-credit/”>If married grandparents file separately, a parent can claim the CTC or ACTC if their filing status is Married Filing Separately</a>. This means you must coordinate with your spouse. Usually, the spouse with higher income claims the child because that spouse can use more of the credit.
Married Filing Separately status is generally bad for taxes. It causes you to pay more in taxes and get fewer credits overall. The IRS created this status for couples who are divorcing or have serious conflicts. Most married couples should file jointly to get better tax results.
Head of Household Filing Status: Big Tax Savings for Unmarried Grandparents
If you are unmarried and have a qualifying grandchild living with you, you might be able to file as “Head of Household” instead of “Single.” Head of Household is a better tax status that gives you a larger standard deduction and better tax rates. This can save you hundreds of dollars in taxes beyond the Child Tax Credit itself.
To qualify for Head of Household status, you must:
- Be unmarried at the end of the tax year
- Pay more than half the costs of maintaining your home for the year
- Have a qualifying child live with you for more than half the year
- The child cannot be married filing a joint return (unless they are just filing to get a refund)
Real Example: Rose is 62, unmarried, and lives alone in a house with her grandchild. Rose pays the mortgage, property tax, insurance, utilities, and groceries. Her grandchild has no income. Rose pays 100% of the household costs. Rose qualifies for Head of Household status.
If Rose files as Single, her standard deduction is $14,600 (for 2025). If Rose files as Head of Household, her standard deduction is $21,900. That is $7,300 extra. If Rose is in the 22% tax bracket, that saves her about $1,600 in taxes. Combined with the Child Tax Credit, her total tax savings could exceed $3,500.
The Earned Income Tax Credit (EITC): A Second Credit for Working Grandparents
The Earned Income Tax Credit is a separate credit from the Child Tax Credit. <a href=”https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/who-qualifies-for-the-earned-income-tax-credit-eitc”>The EITC is for low- to moderate-income workers with qualifying children</a>. If you work and earn money, you might qualify for both credits on the same grandchild. The rules are slightly different.
For the EITC, your grandchild must:
- Be under age 19, or under age 24 if a full-time student, or permanently disabled
- Live with you in the United States for more than half the year
- Be your grandchild (relationship test)
- Not be claimed by more than one person as a qualifying child
- Have a valid Social Security Number
Notice something: the EITC does NOT have a support test. You do not have to provide more than half of the grandchild’s support to claim EITC. This is huge for families where multiple people contribute to the child’s care.
The EITC maximum for 2025 depends on how many qualifying children you have:
- One qualifying child: up to $3,733
- Two qualifying children: up to $6,167
- Three or more qualifying children: up to $6,697
But there is an income limit. If you are single with one qualifying child, your income must be below $43,634. If you are single with two children, your income must be below $49,398. These limits change every year.
Important: <a href=”https://hooklaw.net/blog/working-grandparents-rising-grandchildren-may-qualify-for-eitc/”>To claim EITC with your grandchild, the grandchild must be 18 years or younger or a student under 24 years of age at the end of the year</a>. This is younger than the age limit for some other credits.
Real Example: Marcus is 70 years old and works part-time at a bookstore, earning $28,000 per year. His two grandchildren live with him year-round. Marcus provides $15,000 of support; his daughter (the grandchildren’s parent) provides $10,000 from child support.
Marcus passes all EITC tests. His income is below the limit. He can claim EITC for up to $6,167 plus the Child Tax Credit of $2,200 per child. His total tax credits could exceed $10,500. That could mean he gets a large refund even if very little tax was taken from his paychecks.
But here is the catch: Marcus only gets the EITC if his income comes from work (“earned income”). If Marcus was fully retired and living only on Social Security, he would not qualify for EITC at all.
The Other Dependent Credit: When Your Grandchild Does Not Qualify for the Child Tax Credit
Sometimes a grandchild does not meet the requirements for the Child Tax Credit but you still want to claim them as a dependent. The IRS created the Other Dependent Credit for this exact situation. This credit is much smaller—only $500 per dependent—but it is better than nothing.
Your grandchild might qualify for the Other Dependent Credit if:
- They are age 17 or older (too old for the Child Tax Credit)
- They have an ITIN instead of a Social Security Number
- They do not meet the residency test or another requirement
- You still claim them as a dependent for other tax purposes
<a href=”https://www.irs.gov/newsroom/understanding-the-credit-for-other-dependents”>The Credit for Other Dependents is $500 per dependent and is nonrefundable (you cannot get it as a refund)</a>. It only reduces your taxes owed, not increase your refund. But if you owe $5,000 in taxes and have two grandchildren over 17 that you claim, the $1,000 credit (two × $500) reduces your tax bill to $4,000. That saves money.
The Other Dependent Credit has the same income phaseout rules as the Child Tax Credit. If your income is over $200,000 (single) or $400,000 (married filing jointly), the credit starts to shrink.
Child and Dependent Care Credit: For Grandparents Who Work and Use Childcare
If you work and pay for childcare so you can go to work, you might qualify for the Child and Dependent Care Credit. This is different from the Child Tax Credit. This credit is for the actual cost of care.
For example, if you work full-time and pay a daycare center $8,000 per year to watch your grandchild while you work, you can claim up to $3,000 of that cost as a credit. The credit is 20% of $3,000, which equals $600. This is in addition to the Child Tax Credit.
The child must be under age 13 for you to claim this credit. The care must be necessary for you to work or look for work. You must have earned income in the year you claim it.
<a href=”https://www.allfloridatax.net/blog/tax-breaks-for-grandparents/45257″>Grandparents taking care of a grandchild who is working and using childcare services may qualify for the Child Care Credit</a>. This is often overlooked, but it can save working grandparents significant money.
Common Mistakes That Get Claims Denied
Mistake One: Not Having a Valid Social Security Number
<a href=”https://www.cnbc.com/2025/01/30/child-tax-credit-mistakes-refund.html”>Filing a return claiming the child tax credit before obtaining the grandchild’s Social Security number is a common error. Once that happens, there is no remedy</a>. The IRS has a strict rule: the child must have a valid SSN to be a qualifying child for the Child Tax Credit.
An ITIN (Individual Taxpayer Identification Number) does not work. Even if the grandchild is a U.S. resident alien with an ITIN, they do not qualify for the Child Tax Credit. The IRS made this change in 2017 to ensure better verification of the child’s status. Many families get denied because they do not know this rule.
How to avoid this: Get the grandchild’s Social Security Number before you file. If you are a newborn’s grandparent, apply for the SSN at the hospital or at Social Security office right away. Do not file your taxes until you have the number. If you cannot get the number in time, request an extension from the IRS. You get six more months to file.
Mistake Two: Claiming the Child More Than Once
<a href=”https://www.taxesforexpats.com/articles/tax-reform-2025/us-expat-child-tax-credit-obbb-ssn-rules.html”>Beginning in the 2025 filing season, the IRS will accept a second Form 1040 if a dependent has already been claimed on a previously filed return if the primary taxpayer includes a valid Identity Protection Personal Identification Number (IP PIN)</a>. But generally, if both you and the parent file claiming the same grandchild, the IRS computer system flags this immediately.
The second return gets rejected. The IRS then has to investigate and decide who really should get the credit. This delays everyone’s refunds. Even if you have a right to claim the child, being the second person to file means your return is rejected and you have to refile.
How to avoid this: Make sure only one person files claiming the grandchild. If the parent also lives with the grandchild, coordinate before filing. Use Form 8332 if needed. File your taxes first if you are the proper person to claim the child. Do not let the parent file first and claim the child if you should be claiming them.
Mistake Three: Not Meeting the Residency Test
Many grandparents think the residency test is flexible. It is not. Your grandchild must live with you for more than half the year—183 days or more. If the child lives with you 182 days and the parent 183 days, you fail. There is no partial credit.
Some grandparents think temporary absences do not count toward meeting the test. Actually, temporary absences for school, vacation, or medical care are exceptions and do not count against you. A child at college who comes home for holidays still counts as living with you. A child in the hospital still counts. But an extended stay with the other parent (like six months) definitely breaks the rule.
How to avoid this: Keep a calendar showing where the child lives each night. Save it in case you get audited. If you are uncertain whether the child will spend more than half the year with you, ask them to sleep over at your house on school nights. Make sure the total adds up to at least 183 days before you file your taxes.
Mistake Four: Not Passing the Support Test
You must provide more than 50% of the grandchild’s support. Many grandparents assume they pass this test without actually calculating it. They might pay for groceries and utilities but not realize the parent pays for the child’s clothes, school, and medical care.
Some grandparents think government benefits (like welfare or food stamps) count as someone else paying for support. It does not work that way. Benefits are not counted as paid by anyone. If the government gives the child food stamps, that is not counted as the parent paying for food.
How to avoid this: Create a list of all support costs:
- Food ($200/month × 12 months = $2,400)
- Clothing ($30/month × 12 months = $360)
- Shelter/rent share ($500/month × 12 months = $6,000)
- School supplies ($50/month × 12 months = $600)
- Medical ($100/month × 12 months = $1,200)
- Activities ($25/month × 12 months = $300)
Total: $10,860 per year
You need to pay more than $5,430. If you pay $6,000 and the parent pays $4,860, you pass. Keep receipts proving what you paid. When the IRS audits, they want proof.
Mistake Five: Claiming the Wrong Filing Status
Some grandparents file as Single when they should file as Head of Household. Others file as Married Filing Separately when they should file as Married Filing Jointly. These filing status mistakes cost money.
If you are unmarried, living with a qualifying grandchild, and paying more than half household costs, you must file as Head of Household (unless you are widowed, which has different rules). Filing as Single means you lose the Head of Household tax rate and larger standard deduction.
How to avoid this: Ask yourself: “Am I married at the end of the year?” If no, ask: “Do I have a qualifying child living with me, and do I pay more than half the household costs?” If yes to both, file as Head of Household. If married but filing separately from your spouse, neither of you should be claiming the same child. This is complicated—hire a tax professional to help.
Mistake Six: Mixing Up EITC and Child Tax Credit Rules
The rules for Earned Income Tax Credit and Child Tax Credit are similar but not identical. Some grandparents think if they qualify for one, they automatically qualify for the other. Not true.
The EITC has no support test. You do not have to provide more than half the child’s support. But you must have earned income. The Child Tax Credit has a support test but does not require earned income to claim the nonrefundable portion.
How to avoid this: Understand which credit you are claiming. If you are retired with no income, you cannot claim EITC, but you can claim the Child Tax Credit. If you work, you might get both credits. Read the requirements carefully or hire a professional.
Mistake Seven: Missing Documentation in an Audit
The IRS sometimes audits people who claim the Child Tax Credit, especially for grandparents. If you get audited, you need proof of everything. Proof includes:
- Birth certificate (proving relationship)
- Address documents showing child lived with you (utility bills, lease, mortgage)
- Receipts for support paid (grocery receipts, doctor bills, school bills)
- Social Security card or number verification
- Custody documents or agreements
If you cannot provide proof, the IRS denies the credit and might assess penalties and interest. If you knew you did not qualify but claimed it anyway, the penalties are harsh.
How to avoid this: Keep all documents for at least three years. The IRS can audit back three years (six years if they suspect fraud). Organize your records so you can find them quickly. Many grandparents lose audits because they cannot find the receipts even though they really did pay for support.
Do’s and Don’ts for Claiming Your Grandchild
| Do This | Why It Helps |
|---|---|
| Get grandchild’s Social Security Number before filing taxes | IRS absolutely requires it; no SSN means no credit |
| Calculate exactly how many days grandchild lives with you | Meeting the 183-day test is nonnegotiable |
| Keep detailed records of all support you provide | Audits often focus on support; you need proof |
| File only one return claiming the grandchild with one other person | Two claims triggers IRS matching and rejection |
| Use Form 8332 if a parent agrees to release claim | Without it, parent’s claim wins in ties |
| Do NOT Do This | Why It Hurts You |
|---|---|
| Do not claim EITC without earned income | You will owe back the entire credit plus penalties |
| Do not assume government benefits count as someone paying for support | They do not; only actual money spent counts |
| Do not file as Married Filing Separately unless absolutely necessary | You pay higher taxes and lose tax benefits |
| Do not file before you have the grandchild’s Social Security Number | Once you file without it, you cannot add it later |
| Do not ignore IRS notices claiming you do not qualify | You have rights to appeal and explain |
Pros and Cons of Claiming Your Grandchild
| Pros (Why You Should Claim) | Cons (Why You Might Not Claim) |
|---|---|
| Get $2,200 credit per grandchild reducing your taxes owed | If income too high, credit phases out to zero |
| Possible refund of up to $1,700 per child if you have earned income | You must pass all seven tests—even one failure means no credit |
| Unlock Head of Household filing status with better tax rates | Cannot claim if someone else (like the parent) is already claiming |
| Qualify for EITC on top of Child Tax Credit (up to $6,697 extra) | Parent loses ability to claim child for certain credits if you claim |
| Get Child and Dependent Care Credit if you pay for childcare | Child and Dependent Care Credit has own strict requirements |
| You need documentation; audits are common for grandparent claims |
State-Level Child Tax Credits: Bonus Money in Some States
Beyond the federal credit, <a href=”https://itep.org/state-child-tax-credits-2025/”>fifteen states provide Child Tax Credits in 2026</a>. Eleven states offer fully refundable credits: California, Colorado, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, and Vermont. Four states offer nonrefundable credits: Arizona, Georgia, Oklahoma, and Utah.
These state credits work similarly to the federal credit but often have different rules. Some states require the child to live in that state. Some states have lower income limits. Some states offer smaller amounts per child.
Real Example: A grandparent in California might claim both the federal Child Tax Credit ($2,200) and the California state Child Tax Credit (up to $350). That is $2,550 in credits just for one grandchild. A grandparent in a state with no child tax credit gets only the federal credit.
If you moved to a state with its own child tax credit, check the rules for that state. You might get extra money by claiming your grandchild.
What Happens If the IRS Denies Your Claim
If the IRS denies your Child Tax Credit claim, you have rights. The IRS will send you a notice explaining why they denied it. This notice is your chance to respond.
First, read the notice carefully to understand the exact reason for denial. Common reasons include:
- Grandchild does not have SSN
- Income exceeds phaseout limit
- Residency test not met (insufficient days)
- Support test not met (you did not pay more than half)
- Relationship test not met
- Another person already claimed the same child
Second, gather documentation proving you meet the tests. If the notice says you did not pass the residency test but you actually did, provide your calendar showing days the child lived with you. If it says support test failed but you did meet it, provide receipts.
Third, <a href=”https://finance.yahoo.com/news/3-steps-child-tax-credit-150458357.html”>respond to the IRS notice within the deadline given in the letter</a>. Do not ignore it. The deadline is usually 30 or 60 days from the notice date. If you miss the deadline, you lose your right to appeal.
Fourth, if the IRS still will not budge after your response, you can appeal to the IRS Appeals Division. This is a second layer of review. You can hire a tax professional or attorney to represent you.
Real-World Example: Tom’s Tax Situation
Tom is 66 years old and raised his two grandchildren for the past eight years. The children’s mother (Tom’s daughter) abandoned them, and the father is incarcerated. Tom is unmarried and lives alone with the grandchildren in his home in Texas. Tom earns $65,000 per year working as a mechanic. Tom is thinking about claiming the Child Tax Credit.
Let’s check the seven tests:
Test 1—Age: The grandchildren are ages 12 and 15. Both are under 17. ✓ Pass
Test 2—Relationship: They are Tom’s biological grandchildren. ✓ Pass
Test 3—Support: Tom pays all household expenses. The grandchildren have no income. Tom definitely provides more than half. ✓ Pass
Test 4—Dependent test: Tom will claim them on his return. ✓ Pass
Test 5—Citizenship: Both children were born in Texas. They are U.S. citizens. Both have Social Security Numbers. ✓ Pass
Test 6—Residency: Both children live with Tom 365 days per year. ✓ Pass
Test 7—Income test: Tom’s income is $65,000. His limit as a single filer is $200,000. ✓ Pass
Result: Tom passes all seven tests. He gets the full $2,200 credit per grandchild ($4,400 total). Since Tom has earned income of $65,000 (well above $2,500), he also qualifies for the refundable portion. He could get up to $1,700 per child refunded. Tom’s taxes might be reduced by $4,400, and he might get up to $3,400 back as a refund.
Additionally, Tom is unmarried with qualifying children paying for more than half household costs. Tom qualifies for Head of Household filing status, which gives him even better tax rates and a larger standard deduction. Tom could save $2,000+ in taxes just from Head of Household status, on top of the Child Tax Credit savings.
FAQs: Answering Your Most Common Questions
Q: Can I claim my grandchild if the parent is alive but not involved?
A: Yes—you can claim the grandchild if the grandchild lives with you more than half the year, you provide more than half the support, and all other tests are met. The parent’s involvement (or lack thereof) does not matter as long as only one person claims the child.
Q: My grandchild has an ITIN, not an SSN. Can I still claim the credit?
A: No—the child must have a valid Social Security Number. An ITIN does not qualify. You might qualify for the Other Dependent Credit ($500) instead, but not the Child Tax Credit.
Q: If I claim my grandchild, can the parent also claim them?
A: No—only one person can claim a child for the Child Tax Credit. If both of you file claiming the child, the IRS rejects the second return.
Q: What if my grandchild lives with me nine months and with their parent three months?
A: You pass the residency test—nine months is more than half the year. You can claim the credit unless a parent also claims the child and passes the test. Then the tiebreaker rules apply.
Q: I am retired and receive only Social Security. Can I get the refundable Child Tax Credit?
A: No—Social Security is not earned income. You can claim the nonrefundable Child Tax Credit if you owe taxes, but you cannot get the refundable portion ($1,700). You need earned income to get the refund.
Q: Can grandparents alternate years claiming the grandchild?
A: Maybe—only if the parent agrees and signs Form 8332 for the years the grandparent claims the child. If you want to split claiming, get an agreement in writing.
Q: My income is $250,000 as a single filer. How much credit do I get?
A: Your credit is reduced—your limit is $200,000. You are $50,000 over. You lose $50 for every $1,000 over the limit. $50,000 ÷ $1,000 × $50 = $2,500 lost per child. If the credit is $2,200, you get zero.
Q: Do I need a lawyer to claim my grandchild?
A: Not necessarily—if your situation is simple (you have full custody, parent is absent), you might file on your own. If custody is shared or the parent might contest your claim, hire a tax professional to ensure everything is correct.
Q: What if I made a mistake and claimed the credit when I should not have?
A: You have options—you can file an amended return (Form 1040-X) to correct the error. You might owe money back, but you will not face penalties if the mistake was honest. If the IRS catches it in an audit, you will owe interest on top.
Q: Can my grandchild work and still qualify?
A: Yes—your grandchild’s income does not matter for the Child Tax Credit. The child can work and earn money. You still pass the test as long as you provide more than half of their support.
Q: If my grandchild goes to college out of state, do they still qualify?
A: Yes—a college student still counts as living with you if the college is their temporary home. The child’s main home remains with you even though they live at college during school months.
Q: The grandchild’s parent won’t give me the Social Security Number. What do I do?
A: Get a copy from Social Security directly—you can call Social Security or visit in person. You can request a copy of the child’s Social Security record. Do not file your taxes until you have the number.
Related reading
- How Much Do You Get for a Qualifying Child? (w/Examples) + FAQs
- Do I Qualify for Child Tax Credit? (w/Examples) + FAQs
- How to Qualify for Child Tax Credit (w/Examples) + FAQs
- Can Grandparents Claim the Child and Dependent Care Credit? (w/Examples) + FAQs
- Can Grandparents Get the EITC for Raising a Grandchild? (w/Examples) + FAQs
- How Much Can Grandparents Gift a Grandchild Tax-Free in 2026? (w/Examples) + FAQs