Only one of you can claim the baby on their return. A dependent cannot have a dependent. So if you are able to claim your daughter, you also claim the child. You would then get the $4050 personal exemptions for your daughter and her child and be eligible for the child-related credits such as child tax credit and EIC. If your daughter makes over $4050 for 2017, then you cannot claim your daughter. If you claim daughter as your dependent, she does not get the $4050 personal exemption--but it will not matter since she will now owe tax anyhow. She also would not get EIC or Child Tax Credit if she is your dependent. I would not characterize it as "hurting" her--you are supporting her and her child. You do what the tax law dictates.
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
