Not necessarily. There are two tests for the dependent exemption, the qualifying child test and the qualifying relative test. You first look to see if any person can qualify under the qualifying child test before you look to the qualifying relative test. In order to get the exemption for the child under the qualfying child test, the taxpayer must meet the following requirements:
1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2. The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled.
3. The child must have lived with you for more than half of the year.*
4. The child must not have provided more than half of his or her own support for the year.
5. The child must not be filing a joint return for the year (unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid).
*There is an exception in the case of divorced or separated parents in which the parent claming the exemption would not have to have the child for more than half the year. As that rule is not implicated here, I won’t get into the details of it.
The grandmother would meet the first requirement of the qualifying child test for the necessary relationship as a grandparent counts. I assume that the children in this instance are under age 19 because a person 19 or older does not need a guardian, so the grandmother meets the second test. The third test requires that the children had lived with the grandmother for more than half the year. As the child’s guardian I think it likely that the grandmother had the child for more than half the year, but we’d need more facts to determine that. Very likely the children did not provide more than half their own support nor is it likely that they filed a joint tax return with someone else, since they would need to be married to do that. In short, it appears that the grandmother would be the one eligible to claim the children assuming that the children lived with her for over half the year.
As you can see, for the qualfying child test there is no requirement that the taxpayer have paid more than half the child’s total support. That is one of the requirements for the qualifying relative test. Only if no one meets the qualifying child test would you then look to the qualifying relative test.
The rules for all this are explained in greater detail in IRS publication 501.