Grandparent Eligibility

To claim your grandchildren as dependents on a personal tax return, you must not be eligible to be the dependent of another taxpayer. If you're married and file a joint return, your spouse’s eligibility to be the dependent of another taxpayer also precludes you from claiming your grandchildren. The rule applies regardless of whether another taxpayer actually claims you or a spouse as a dependent.

Grandchild’s Age

A grandchild must meet the requirements of a qualifying child before you can take a dependency exemption. Grandchildren must not reach the age of 19 at any time during the tax year. If a grandchild is a full-time student, you can claim them as a dependent until they reach the age of 24. However, there's no age limitation for a grandchild who has a total and permanent disability. This exception requires that the disability prevents the grandchild from engaging in any substantial gainful activity and is corroborated by a qualified doctor’s diagnosis.

Requirements

Every grandchild you claim as a dependent must reside with you for more than half of the tax year. The IRS considers temporary absences of a grandchild from the home due to school, illness or vacation as time the grandchild resides with you. Additionally, the exemption requires you to provide at least half of the grandchild’s financial support during the tax year. For example, if you don't charge the grandchild rent for living in the home, you can attribute a portion of annual housing expenses to the grandchild when evaluating whether you provide at least half of the support.

Other Taxpayers

In the event that other taxpayers are also eligible to claim the grandchild as a dependent, only one of you can actually take the exemption. The IRS provides guidance for determining who has priority in claiming the dependent. A parent always has priority over a grandparent. If the child’s parent isn't available or agrees not to take the exemption, the taxpayer with the highest adjusted gross income receives priority.

Reporting

You can claim all grandchild exemptions on IRS Form 1040. You must provide the IRS with the dependent’s name, Social Security number and relationship to you. On the second page of the form, you can deduct from taxable income an amount equal to the number of exemptions you claim multiplied by the prevailing exemption amount for the tax year. If you're not married, claiming dependents allows you to file as head of household and provides you with a larger standard deduction.