The Earned Income Tax Credit is a refundable tax credit that essentially puts more money back into the pockets of working taxpayers. However, there are several requirements for taxpayers to meet in order to qualify for EITC. Your income levels, if you can properly claim dependents, and how many dependents will determine how much of the EITC you can get.
Put simply, the most important things to determine if you qualify:
- Your income should be “earned.” This means most of your money came from doing work and getting paid for it, be it for a job or contractor work.
- Adjusted Gross income (AGI) limit – AGI is your income after certain deductions like payments to retirement plans. For people without dependents, your AGI must be less than $15,270 in a year. The limit increases depending on your marital status and how many dependents you claim for up to a maximum AGI limit of $54,844 for married people with 3 or more dependents.
- You must have a valid social security number.
- Filing status cannot be married, filing separately (MFS).
- You (or your spouse) must be a US citizen or resident alien (has his or her green card).
- Dependents must meet the qualifying child or qualifying dependent status.
- If you do not have any dependents, you must be between the ages of 25 and 65, cannot be claimed as a dependent on another person’s tax filing, and be in the United States for at least half of the year.
- Cannot file Form 2555, which reports any foreign earned income.
- Your investment income must be less than $3,500 for the year.
Each person filing has a different situation, so bear in mind your own when claiming EITC. For example, a student living at home who is claimed as a dependent for their parent’s tax return cannot claim EITC. However, a single working parent with a young child can most likely claim EITC, granted they meet the other requirements. Assistance to properly calculate and claim EITC is usually available through the many tax preparing firms and even nonprofits offer tax filing and EITC help for qualified individuals and families.
While our firm, MiklosCPA, is focused on providing small to mid-sized business clients with the best in accounting and tax services using the latest in “virtual office” services, we believe that knowledge can help others. Sharing knowledge with others who would benefit, such as this article for EITC, can greatly help people who may qualify but are unaware of such benefits in the tax code. Share this article with any friends or family that may be interested and check our social media for future articles! If you are interested in learning more about our services for your business taxation needs, reach out to us for a preliminary discussion!