Virginia Kinship Caregiver Tax Credits — What Grandparents Can Claim

Federal Tax Credits for Kinship Caregivers

When you raise a grandchild or relative's child, you may qualify for significant federal tax credits that reduce your tax bill or increase your refund. These credits are based on federal IRS rules, not Virginia state law — but they apply to Virginia filers.

The two biggest credits for kinship caregivers:

Child Tax Credit (CTC): For tax year 2025, up to $2,200 per qualifying child under age 17. The child generally must live with you for more than half the tax year, be related to you (grandchild, niece, nephew), be a U.S. citizen, U.S. national, or U.S. resident alien, and be claimed as your dependent. You and the child must have Social Security numbers valid for employment. Up to $1,700 may be refundable as the Additional Child Tax Credit if you meet its separate rules, including the earned-income requirement.

Earned Income Tax Credit (EITC): A refundable credit for eligible workers with low-to-moderate income. The amount depends on earned income, adjusted gross income, filing status, and the number of qualifying children. For tax year 2025, the maximum credit with one qualifying child is $4,328; the income ceiling is $50,434 for most filing statuses or $57,554 for married filing jointly. Other eligibility rules apply. If you are retired and have no earned income, the EITC does not apply.

Claiming the Child as a Dependent

To claim the CTC, you must claim the child as your dependent on your federal tax return. The EITC uses its own qualifying-child rules and IRS tiebreakers. The qualifying-child tests include:

• Relationship: The child must be your grandchild, niece, nephew, or other qualifying relative
• Residence: The child lived with you for more than half the year
• Age: Under 19 at year-end (or under 24 if a full-time student)
• Support: The child did not provide more than half of their own support

You do not need a court custody order to claim a child as a dependent. The IRS looks at where the child actually lived and who provided support, not legal custody status.

One important wrinkle: if a child meets the qualifying-child tests for both a parent and a non-parent caregiver, a parent who claims the child generally has priority. If both parents claim the child, the parent the child lived with longer has priority; if the child lived with each parent for the same amount of time, the parent with the higher adjusted gross income has priority. If no parent claims the child, a non-parent can use the child as a qualifying child only if the non-parent's adjusted gross income is higher than that of any parent who could claim the child.

How Tax Dependency Affects Benefit Eligibility

Claiming the child as a tax dependent has consequences beyond your tax return. For FAMIS and Medicaid health coverage, if you claim the child as a tax dependent, your income is included in the MAGI household calculation for the child's health coverage. If you do not claim them, only the child's own income counts.

For TANF child-only, your tax filing status does not change the eligibility rules — your income is excluded regardless.

This creates a trade-off: claiming the child as a dependent gets you the CTC and potentially the EITC, but it may affect the child's health coverage eligibility if your income is above the FAMIS threshold (205% FPL). For most kinship caregivers on modest incomes, both the tax credits and health coverage remain available. But if you are on the income borderline, it is worth running the numbers both ways.

Virginia State Tax Considerations

Virginia offers a state Earned Income Tax Credit. For tax years 2025 and 2026, its refundable EITC is 20% of the federal EITC; the refundable credit is scheduled to expire after tax year 2026, while Virginia's nonrefundable EITC remains 20% of the federal credit. Virginia also allows a dependent exemption for each dependent claimed on your federal return, subject to state filing rules.

Virginia residents also benefit from the federal Dependent Care Credit if you pay for childcare while working — this is separate from the CCSP childcare subsidy and applies at tax time rather than through a monthly benefit.

Getting Tax Help

Free tax preparation is available through Volunteer Income Tax Assistance (VITA) sites across Virginia. The IRS does not set one program-wide income limit; it says VITA generally focuses on people who make about $70,244 or less, and individual sites may set their own limits. Ask a local site whether it can help with kinship dependency and tiebreaker questions.

For the full picture of financial benefits available to kinship caregivers in Virginia — including TANF, SNAP, FAMIS, and childcare subsidies alongside these tax credits — the Virginia kinship financial help guide covers each program with the eligibility rules specific to your caregiving arrangement.

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