Hawaii Tax Credits for Grandparents Raising a Grandchild: EITC and Child Tax Credit

Federal Tax Benefits You May Be Missing

Grandparents and relatives raising a child often qualify for significant federal tax credits without realizing it. If the child lived with you for more than half the tax year and meets the IRS tests for a qualifying child, you may be able to claim the child as a dependent and access credits. For the qualifying-child support test, the child must not have provided more than half of their own support; you do not have to provide more than half.

Earned Income Tax Credit (EITC)

The EITC is a refundable tax credit for low- and moderate-income workers. If you have earned income (wages, self-employment, or certain other sources) and you claim a qualifying child, the credit increases substantially compared to filing without a dependent.

For the EITC, a qualifying child must meet relationship, age, residency, and joint-return tests; there is no support test. Grandchildren meet the relationship test. The child must live with you in the United States for more than half the tax year and have a valid Social Security number. The child must be under age 19 and younger than you (or your spouse if you file jointly), or under age 24, a full-time student for at least five months, and younger than you (or your spouse if you file jointly), or permanently and totally disabled at any age. The child generally must not file a joint return unless filing only to claim a refund of withheld or estimated tax.

For grandparents with modest earned income, the EITC can be worth several thousand dollars. The credit is refundable, meaning you receive it even if you owe no federal income tax.

If your sole income is Social Security retirement or pension, that does not count as earned income for EITC purposes. You need at least some wages or self-employment income to qualify.

Child Tax Credit (CTC)

For tax year 2025, the Child Tax Credit provides up to $2,200 per qualifying child under age 17. To claim it, you must have the child as your dependent, and the child needs a valid Social Security number. The refundable Additional Child Tax Credit is generally calculated as 15% of earned income over $2,500, up to $1,700 per child for 2025.

Income phase-outs begin at $200,000 for single filers and $400,000 for married filing jointly — thresholds that most kinship caregiving households fall well below.

Child and Dependent Care Credit

If you pay for childcare so you can work or look for work, the Child and Dependent Care Credit covers a percentage of those costs for children under 13. This stacks with childcare subsidies from CCCH or Preschool Open Doors — the tax credit applies to out-of-pocket childcare expenses you actually paid, net of any subsidies received.

Hawaii State Tax Considerations

Hawaii has a refundable state EITC, in addition to other credits and deductions that may apply to kinship households, including a refundable food/excise tax credit and dependent exemptions. Consult a tax professional or use the IRS Volunteer Income Tax Assistance (VITA) program for free tax preparation.

VITA sites operate across Hawaii during tax season and specifically help low-to-moderate-income households, elderly filers, and people with disabilities. Call 211 or check irs.gov/vita for locations on your island.

Who Can Claim the Child?

This is where tax filing gets complicated in kinship families. If a parent and another person could both claim the child as a qualifying child, the parent generally has priority. If no parent can claim the child, the person with the highest adjusted gross income (AGI) may claim the child. If a parent could claim the child but does not, a nonparent may claim the child only if that person's AGI is higher than the highest AGI of any parent who could claim the child. The child's time living with you or the amount of support you provide does not override these tiebreaker rules.

A formal custody order or guardianship decree is not required to claim a child as a dependent. The IRS applies the relevant relationship, age, residency, support, and joint-return tests, plus the tiebreaker rules when more than one person could claim the child.

For a comprehensive breakdown of how tax credits, TANF, SNAP, and other benefits interact in a Hawaii kinship household, see the Hawaii kinship financial help guide.

Frequently Asked Questions

Can I claim EITC if I only receive Social Security? Social Security retirement income is not earned income. To qualify for EITC, you need wages, self-employment income, or certain other earned income in addition to or instead of Social Security.

Does receiving TANF for the child affect my tax credits? TANF benefits are not taxable income and do not need to be reported on your tax return. They do not reduce or disqualify you from EITC or CTC.

What if the child's parent also files and claims the child? The IRS generally gives a parent priority over a nonparent who could also claim the child. If no parent can claim the child, the person with the highest AGI may claim the child. If a parent could claim the child but does not, a nonparent may do so only if their AGI is higher than the highest AGI of any parent who could claim the child. Keep records of the child's living arrangement, but support you provide does not override these tiebreaker rules.

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