More and more individuals who thought their child-rearing days were over are now raising their grandchildren. It is estimated that 6.5 million children in the United States currently live with at least one grandparent, accounting for approximately 9% of all children nationally and more than half of those not living with their parents.
Another study found that the number of grandchildren living with their grandparents has increased 50% over the past ten years. Grandparents in this challenging situation should be aware that a variety of tax breaks may be available to ease the financial burden of becoming primary caregivers for grandchildren. These include:
To qualify for EITC for 2021 on account of a grandchild or grandchildren, a taxpayer's adjusted gross income (AGI) must be less than: $51,464 ($57,414 for married filing jointly) if he or she has three or more qualifying children; $47,915 ($53,865 for married filing jointly) if he or she has two qualifying children; and $42,158 $48,108 for married filing jointly) if he or she has one qualifying child. There's no EITC if the taxpayer files as married filing separately, isn't a U.S. citizen or resident alien all year, files Form 2555 or Form 2555-EZ (relating to foreign earned income), doesn't have earned income, or has more than $10,000 of investment income for 2021 ($3,650 for 2020).
Note: For 2021 only, as part of the COVID relief, the child tax credit was increased to $3,000 for children under the age of 18 ($3,600 for children under age 6) and the credit is fully refundable.
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