Are you a grandparent caring for grandchild(ren) or think you may be soon? I read a blog written by Robert Trinz that shares deductions you may be able to take on your tax return. Read more to see what may apply to your situation.
Tax breaks you may be able to use include:
- Head of household filing status -This is often more favorable than single (of course if married, you would most likely select married filing jointly).
- Exemption for the child – A taxpayer is entitled to a deduction equal to the exemption amount for each person who qualifies as his or her dependent.
- Earned income credit – To qualify on account of grandchildren, the AGI must be less than certain specific amounts that depend on the number of qualifying children the grandparent has.
- Child tax credit – Individuals may claim a maximum $1,000 for each qualifying child the taxpayer can claim as a dependent.
- Credit for child and dependent care expenses – The maximum amount of employment-related expenses that may be used to compute the credit is $3,000 for one qualifying individual, or $6,000 for two or more qualifying individuals.
- Credits or deductions for qualified education expenses – There are a number of tax breaks that may be available to a grandparent who pays his or her grandchild’s education costs.
- Deductions for medical and dental expenses – An individual who itemizes can deduct the amount by which certain unreimbursed medical and dental expenses paid during the year for himself or herself, his or her spouse, and his or her dependents exceed 10 percent of his AGI.
- Adoption expenses – In addition to adoption fees, qualified expenses include court costs, attorney fees, and travel expenses.
- Employer benefits – Grandparents who are still employed should consult their company’s human resources representative to see if they are eligible for grandchild-related benefits
- State tax breaks – States provide tax breaks to grandparents with respect to their grandchildren, particularly where the grandchild is a qualifying child or meets similar state-provided rules.
There is a lot of information he shares about each of these deductions, but there are too many details to share in this blog post directly. If you feel this topic relates to your situation and you’d like to read more about each of these, see his full blog at http://www.accountingweb.com/tax/individuals/tax-breaks-for-grandparents-raising-their-grandchildren?source=tx061217.
Robert Trinz is a senior analyst with Thomson Reuters Checkpoint within the Tax & Accounting business of Thomson Reuters.