What Parents and Grandparents Need to Know About Child Tax Credits in 2026

Families with children may want to take a fresh look at two federal tax credits that can put money back in their pockets.

The Child Tax Credit and the Child and Dependent Care Credit are separate benefits, and each works a little differently. One helps families with the general cost of raising children. The other helps cover care expenses, such as daycare or after-school programs, that allow parents or guardians to work.

For parents, grandparents, and other caregivers, knowing the difference can matter at tax time.

The Child Tax Credit is designed for families with qualifying children under age 17. Under the 2026 rules described in recent tax-law updates, the credit is worth up to $2,200 per qualifying child. Part of that credit may be refundable, meaning eligible families can receive some money back even if they owe little or no federal income tax.

To qualify for the refundable portion, a household generally must have earned income. The credit also phases out at higher income levels, beginning at $200,000 for single filers and $400,000 for married couples filing jointly.

A qualifying child must meet several requirements. The child must be under age 17, have a valid Social Security number, live with the taxpayer for more than half the year, and meet relationship and support tests. In many households, this is straightforward. In others, especially where multiple generations live together, the rules can become more complicated.

That is where grandparents should pay close attention.

Grandparents raising grandchildren full-time may be able to claim the Child Tax Credit if the child meets the requirements and the grandparent is the person entitled to claim the child as a dependent. The grandchild generally must live with the grandparent for more than half the year. If a parent also lives in the home, the parent may have the first claim unless specific IRS rules allow otherwise.

If the child does not fully qualify for the Child Tax Credit, another option may still be available. Some dependents may qualify for the Credit for Other Dependents, which is a non-refundable credit of up to $500.

The Child and Dependent Care Credit is different. It helps working parents and caregivers offset the cost of care for a child or dependent so they can work or look for work. Eligible expenses may include daycare, preschool, day camps, and after-school care.

For this credit, families may be able to count up to $3,000 in care expenses for one qualifying child or dependent, or up to $6,000 for two or more. The credit is calculated as a percentage of those expenses, generally ranging from 20 percent to 50 percent, depending on income.

In most cases, both spouses must have earned income to claim the Child and Dependent Care Credit. Exceptions may apply if one spouse is a full-time student or is disabled.

The two credits can sometimes apply in the same household, but they are not the same thing. A family may qualify for the Child Tax Credit because they are raising a child, while also qualifying for the Child and Dependent Care Credit because they paid someone to care for that child while they worked.

For grandparents, the key question is often who can legally claim the child. Living arrangements, support, custody, and whether a parent is also in the home can all affect eligibility.

Families should keep records showing where the child lived, who paid support, and what care expenses were paid. For dependent care costs, taxpayers should also keep the provider’s name, address, and taxpayer identification number.

Tax rules can change, and individual situations vary. IRS Publications 501, 503, and 929 explain the rules for dependents, child and dependent care expenses, and children’s tax issues. A qualified tax professional can help parents and grandparents determine which credits apply to their household.