Tax Benefits for Grandparents Raising Grandchildren in California

Benefits programs like CalWORKs and CalFresh help with monthly expenses, but grandparents raising grandchildren often miss the tax credits that can put thousands of dollars back in their pocket each year. Some of these credits are available even if you don't have legal custody.

Head of Household Filing Status

If you are unmarried or considered unmarried at year-end, your grandchild meets the IRS qualifying-child rules, the child lives with you for more than half the year, and you pay more than half the cost of maintaining the home, you may qualify to file as head of household — even if you're not the child's legal guardian. Head of household gives you a larger standard deduction and more favorable tax brackets than filing as single.

For tax year 2026, the head of household standard deduction is significantly higher than the single filer deduction, which can reduce your taxable income by several thousand dollars.

The IRS generally treats a grandchild as a qualifying person for head of household when the applicable qualifying-child and filing-status rules are met. Key requirements include:

• The child lived with you for more than half the year
• You paid more than half the cost of keeping up the home (rent, mortgage, utilities, food, repairs)
• The child is under 19, or under 24 and a full-time student, or permanently and totally disabled

You don't need a court order or guardianship. The child living with you and your financial support of the household are what matter.

Child Tax Credit

If you claim the grandchild as a dependent, you may qualify for the federal Child Tax Credit. The credit amount and income phaseout thresholds change annually — check IRS.gov for the current year's figures. You and the child must have valid Social Security numbers, and the child must be under 17 at the end of the tax year and meet the IRS qualifying-child tests, including residency and support requirements.

The refundable portion of the Child Tax Credit (the Additional Child Tax Credit) can result in a refund even if you owe no federal tax, but you generally need at least $2,500 in earned income to qualify.

California Earned Income Tax Credit (CalEITC)

If you have earned income — from a job, self-employment, or even part-time work — you may qualify for CalEITC in addition to the federal Earned Income Tax Credit (EITC). CalEITC has lower income thresholds than the federal credit but provides a state-level refund on top of it.

Grandparents who work part-time while raising a grandchild are often in the income range where these credits overlap, potentially providing several thousand dollars in combined refunds.

Dependent Care Credit

If you pay for childcare so you can work or look for work, you may claim the Child and Dependent Care Credit on your federal return. This covers expenses for a grandchild under 13, including:

• Daycare or preschool
• Before and after school care
• Summer day camp

California has its own nonrefundable dependent care credit, with separate eligibility rules from the federal credit. Both credits reduce your tax bill dollar for dollar when you qualify.

What Doesn't Affect Your CalWORKs Grant

Here's an important interaction: claiming a grandchild as a tax dependent does not affect the child-only CalWORKs grant. The CalWORKs program evaluates the child's income and resources at the time of application and recertification. Your tax filing status and credits are separate from the county welfare determination.

However, claiming the child as a tax dependent does affect Medi-Cal eligibility calculations under MAGI rules. If you claim the child, the child joins your tax household for Medi-Cal purposes, and your income counts toward the child's eligibility. If you don't claim the child, the child is a "non-filer" and eligibility is based on the child's income alone. For most grandparents on moderate or higher incomes, not claiming the child preserves the child's standalone Medi-Cal eligibility — but you'd lose the tax credits.

This is a real trade-off, and the right answer depends on your specific income level and the child's health coverage needs.

Getting Help with Tax Filing

Free tax preparation is available to kinship caregivers through:

• VITA (Volunteer Income Tax Assistance) — free basic federal tax preparation for eligible taxpayers; participating sites may set their own income limits
• AARP Tax-Aide — free tax preparation for taxpayers over 50, available at libraries and senior centers statewide
• CalFile — California's free online state tax filing system

The California kinship financial help guide covers the interaction between tax credits and benefits programs, so you can make an informed decision about which combination puts the most money in your household.

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