If My Granddaughter Has Lived With Me for the Entire Year Can I Claim Her on My Taxes?
Caring for a family member, such as a child, niece, nephew or grandchild, is a significant financial commitment. The Internal Revenue Service grants a tax exemption to the caretakers of dependents, which can reduce the financial burden of raising or caring for dependents. You may be able to claim a grandchild that lived with you for the entire year as a dependent on a tax return if the grandchild meets certain eligibility requirements.
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Qualifying Child
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The IRS recognizes two types of dependents: qualifying children and qualifying relatives. The IRS says that a grandchild counts as a qualifying child if she is under the age of 19 at the end of the year or under the age of 24 and a full time student, lived with you more than half of the year, did not provide more than half of her own support for the year and does not file a joint tax return.
Qualifying Relative
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Even if your grandchild does not meet the rules to be a qualifying child, she may still count as dependent under the rules for qualifying relatives. The IRS says that a grandchild counts as a qualifying relative if she is not a qualifying child, had less than $3,650 in gross income for the for the year and you provided more than half of her support for the year.
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Exemption Amount
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The IRS says that the dependent exemption is equal to $3,650 for each dependent claimed on 2010 tax returns. It is possible to claim several dependents if each meet the eligibility criteria. The dependent exemption reduces taxable income by the amount of the exemption. The actual amount of tax savings that results from the exemption depends on your income tax rate. For instance, if you make enough income to fall in the 35 percent tax bracket, reducing taxable income by $3,650 saves 35 percent of $3,650, or $1 277.50 in taxes.
Considerations
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In some cases, a child may count as a qualifying child for more than one person. The IRS says that only one person can claim a dependent exemption for a child and that a child's parent has precedence over grandparents and other caretakers for claiming a tax exemption. If no parent can claim the child as a dependent, the child is treated as the dependent of the person with the highest adjusted gross income for the year.
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