Montana Kinship Caregiver Tax Credits

Raising a grandchild or relative's child changes your tax situation in ways that can put real money back in your pocket. Several federal credits are available to kinship caregivers, and you do not always need legal custody to claim them — but the qualifying-child rules have specific requirements you need to meet.

Child Tax Credit

The federal Child Tax Credit (CTC) is worth up to $2,000 per qualifying child under age 17. To claim it, the child must meet all four qualifying-child tests:

• Relationship: the child must be your son, daughter, stepchild, grandchild, niece, nephew, sibling, or a descendant of any of these
• Age: under 17 at the end of the tax year
• Residency: the child lived with you for more than half the year
• Support: the child did not provide more than half of their own financial support

Grandparents, aunts, uncles, and older siblings meet the relationship test by default. The residency test is what matters most for kinship caregivers — you need the child living in your home for at least seven months of the year.

A portion of the CTC is refundable as the Additional Child Tax Credit, meaning you can receive money back even if you owe no federal income tax.

Earned Income Tax Credit

The EITC is a refundable credit designed for low-to-moderate-income workers. If you are working (even part-time) and raising a qualifying child, the credit can be substantial — up to several thousand dollars depending on your income and number of children.

The qualifying-child rules are the same as for the CTC: relationship, age (under 19, or under 24 if a full-time student), residency for more than half the year, and the child cannot file a joint return.

For retired grandparents with no earned income, the EITC is not available because it requires earnings from work. But if you are working even modest hours, it is worth checking whether you qualify.

Child and Dependent Care Credit

If you pay for childcare so you can work or look for work, the Child and Dependent Care Credit offsets part of that cost. The credit covers up to $3,000 in care expenses for one child under 13 (or $6,000 for two or more). The credit percentage ranges from 20% to 35% of expenses depending on your income.

This stacks with Montana's Best Beginnings childcare scholarship. If Best Beginnings covers part of your childcare cost and you pay a copay out of pocket, the federal credit applies to the portion you paid.

What You Need at Tax Time

The most important document is the child's Social Security number. If the child does not have one, apply at your local SSA office — you will need the child's birth certificate and your identification. Without the SSN, the IRS will not process CTC or EITC claims.

Keep records of how long the child lived with you during the year. School enrollment records, medical visit records, and DPHHS correspondence all help establish residency if the IRS questions your return.

If both you and the child's parent could claim the child, the IRS tiebreaker rules apply: the person the child lived with longer during the year generally wins. If the child lived with both of you equally, the person with the higher adjusted gross income claims the child.

The Montana Kinship Financial Help Guide covers the full range of financial support available to relative caregivers — from TANF and Medicaid to tax strategies — so nothing falls through the cracks.

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