Delaware Tax Credits for Grandparents Raising a Grandchild

The Tax Benefits Most Kinship Caregivers Miss

Raising a grandchild or relative's child on a fixed income stretches every dollar. What many Delaware caregivers do not realize is that claiming the child on their federal tax return unlocks credits worth several thousand dollars per year — and these credits work alongside the public benefits (like TANF child-only grants and Medicaid) that the child already receives.

The requirements depend on the tax benefit. For the Child Tax Credit, a qualifying child generally must live with you for more than half the tax year and must not provide more than half of their own support. The EITC also uses qualifying-child tests, but does not require you to provide more than half the child's support. A separate qualifying-relative claim generally requires you to provide more than half of the person's support. A formal court order of custody or guardianship is not required for these federal tax tests.

Federal Credits Available to Delaware Caregivers

Delaware does not impose a state income tax credit specifically for kinship caregivers, but the federal credits you claim on your IRS return apply regardless of which state you live in.

Child Tax Credit (CTC): If the child is under 17, you may qualify for the Child Tax Credit — up to $2,200 per qualifying child for tax year 2026. Up to $1,700 may be refundable through the Additional Child Tax Credit; eligibility for the refundable portion requires earned income of at least $2,500. The child and the claiming taxpayer must have Social Security numbers valid for employment; for a joint return, only one spouse must have a valid SSN. The child must be your dependent.

Earned Income Tax Credit (EITC): If you have earned income (wages, self-employment), the EITC provides a refundable credit that can exceed $3,000 for one qualifying child and more for additional children. Income limits apply, and the credit phases out at higher earnings. Many retired caregivers with part-time income qualify. If your only income is Social Security or a pension, EITC does not apply because those are not earned income.

Dependent status and filing status: Claiming a grandchild as a dependent may allow you to file as Head of Household rather than Single, which gives you a larger standard deduction and more favorable tax brackets. This filing status requires that you pay more than half the cost of keeping up the home where the child lives.

Child and Dependent Care Credit: If you pay for childcare so you can work or look for work, you may claim this credit on expenses up to $3,000 for one qualifying person or $6,000 for two or more qualifying people. This can stack with Delaware's Purchase of Care subsidy — the POC subsidy covers the provider directly, and any remaining out-of-pocket childcare costs you pay may qualify for the federal credit.

Who Can Claim the Child

For the CTC and EITC, a child must meet the relevant relationship, age, residency, and joint-return tests. A qualifying child may be your son, daughter, stepchild, foster child, sibling, grandchild, niece, or nephew. Only one taxpayer may claim a child as a qualifying child for these benefits, subject to IRS tie-breaker and special rules for parents who live apart.

If a child is the qualifying child of both a parent and a grandparent, the parent has priority if the parent claims the child. If no parent claims the child, a grandparent may claim the child as a qualifying child only if the grandparent's adjusted gross income is higher than the highest adjusted gross income of any eligible parent. Form 8332 allows a custodial parent to release a dependent and CTC claim to a noncustodial parent; it does not transfer the child's tax claim to a grandparent.

This matters in kinship situations where a parent was present for part of the year before the child moved in with you. Keep records of when the child began living in your home — school enrollment dates, medical appointment records, or a dated caregiver affidavit all serve as evidence.

How Tax Credits Interact with TANF

Receiving TANF child-only cash does not disqualify you from claiming the child on your taxes. TANF is not taxable income and does not appear on your return. The child's TANF grant does not count as income for the child either.

Delaware uses MAGI household rules to determine which income counts for Medicaid. For a child under 19 claimed as a tax dependent by someone other than a parent or spouse, Delaware applies the non-filer household rules: the household includes the child, any parents living with the child, and any siblings under 19 living with the child. A grandparent's income is not automatically included just because the grandparent claims the child.

Documentation to Gather

Before tax season, collect:

• Valid Social Security numbers — the child and claimant need SSNs valid for employment to claim the EITC based on a qualifying child; the CTC also requires SSNs valid for employment for the child and the taxpayer (at least one spouse on a joint return)
• Proof of residency — school enrollment records, medical records, or utility bills showing the child's address at your home
• Proof of care dates — dated caregiver affidavit, DFS safety agreement, or school enrollment form showing when care began
• Childcare expense receipts — if claiming the Child and Dependent Care Credit
• IRS Form 8332 — used by a custodial parent to release a dependent and CTC claim to a noncustodial parent; it does not release the claim to a grandparent

You do not need a court order, guardianship papers, or a custody decree to file. The IRS accepts qualifying relative relationships and residency documentation.

Getting Free Tax Help

Delaware AARP Tax-Aide sites and Volunteer Income Tax Assistance (VITA) centers prepare free returns for low-to-moderate income filers. VITA preparers are specifically trained on dependent-child rules and can help kinship caregivers determine whether they qualify for the EITC and CTC. Locations are available at all three Delaware county service areas during tax season.

For a full walkthrough of every Delaware benefit available to kinship caregivers — from TANF child-only grants to Medicaid, SNAP, and childcare subsidies — the Delaware Kinship Financial Help Guide covers application steps, required documents, and agency contacts in one place.

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