Grandparents providing support to grandchildren face many difficult issues. In particular, the additional costs of raising a grandchild can delay a planned retirement or other personal financial goals. However, several important tax breaks are available to ease this burden for grandparents. These include:
- Head of household filing status. If you are unmarried and provides at least half of the support for your grandchild who has the same principal place of abode as the taxpayer, you may be eligible to file under head of household status. This is generally more favorable than filing as a single taxpayer.
- Dependent exemptions. If your grandchild qualifies as a dependent, you may be able to take advantage of several tax breaks. In addition to the exemption, you may be able to claim the earned income credit, child tax credit, or credit for childcare expenses.
- Education credits. If you pay your grandchild’s education costs, several other credits may be available. These include the American Opportunity Tax Credit, the Lifetime Learning Credit, and other favorable tax breaks.
If you have younger grandchildren, you may also be able to make tax-favorable contributions to save for their future education.
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