Earned Income Credit – Tax Credit Requirements and Guidelines



Workers who don’t make much money or who lost their jobs last year can qualify for the Working Income Tax Credit, or EITC. With this tax break, qualified people can get a refund of part of the taxes they have paid.

It can even produce a tax refund for eligible filers who did not owe tax. Most tax credits are non-refundable, which means they simply zero a tax bill. For example, you owe $ 800 and have a credit of $ 1,000. This credit will clear your $ 800 bill, but you will lose the extra $ 200.

But the EITC is a refundable credit, so it will get you that extra $ 200 back as a refund from the IRS.

Be warned, however, that credit is rather complicated, and because qualifying taxpayers typically don’t have a lot of money to spend, they usually can’t afford professional help filing it. The IRS has an online program, the EITC Assistant, to help these registrants.

Who qualifies?

By answering a few questions and providing income information, the online program will help you determine your correct reporting status, whether your children meet credit requirements, and give you an estimate of how much credit you might receive. .

  • You must have earned income from work, your business or a farm.
  • Your adjusted gross income cannot exceed certain limits.
  • If you are married, you must file a joint return.
  • If you have children, they must follow all the rules that apply to children.
  • Unearned income cannot exceed $ 3,400 in 2016.

Here is an overview of the basic guidelines and pitfalls of earned income credit so you know what to expect when accessing the program online.

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Many people think that credit is only available to parents. It’s not. But the amount the IRS will return is higher for qualifying low-wage taxpayers with children. The amount is adjusted for inflation each year.

Maximum amounts of the earned income tax credit
Number of eligible children claimed tax year 2016 tax year 2017


$ 506 $ 510


$ 3,373 $ 3,400
2 $ 5,572 $ 5,616
3 or more $ 6,269 $ 6,318

To qualify for the credit, a taxpayer must earn money, but not too much.

Income from activity and AGI ceilings for single persons or heads of household
Number of eligible children claimed tax year 2016 tax year 2017
Nothing $ 14,880 $ 15,010
1 $ 39,296 $ 39,617
2 $ 44,648 $ 45,007
3 or more $ 47,955 $ 48,340
Earned income and AGI limits for married couples, joint filing
Number of eligible children claimed tax year 2016 tax year 2017
Nothing $ 20,430 $ 20,600
1 $ 44,846 $ 45,207
2 $ 50,198 $ 50,597
3 or more $ 53,505 $ 53,930

All income from wages or salaries, as well as any income from self-employment, count towards the eligibility limits. Investment income should also be taken into account. If you collect too much of this unearned income, it could disqualify you. For the 2016 returns, if you earned more than $ 3,400 in investment income, you cannot claim the earned income credit. For 2017, the limit is $ 3,450.

Married couples who file separate returns are not eligible for the earned income credit. If you are married but your spouse has not lived in your home in the last six months of the year, you may be able to declare yourself as the head of the household and get the credit.

And if you don’t have kids, you have to pass four more tests before you can claim it.

Tests for EITC applicants without children

  • You must be at least 25 years old but under 65 at the end of the tax year for which you are applying. If you are married, at least one of the spouses must be of the required age.
  • You cannot be the responsibility of another taxpayer.
  • You cannot be the child that another taxpayer could use to qualify for the credit.
  • You must live in the United States for more than half of the tax year.

Requirements that children must meet

All taxpayers who claim credits based on the children they are raising should consider the age of each child, the child’s relationship with the taxpayer, where the child lived during the tax year and tax situation of the child.

In most cases, the child must be under 19 at the end of the tax year in which the EITC is claimed. However, if the child is a full-time student, he or she may be up to 23 and claim the credit. In addition, a child with a permanent disability, regardless of age, can be claimed under the work income credit.

The relationship test is satisfied if the child is your son or daughter (birth or adopted), stepson or grandchild. Your brother, sister, half-brother or half-sister (or the child or grandchild of these parents) may also be taken into account for credit purposes.

A relationship with a foster child may be eligible for the credit as long as the child has been placed with you by a licensed placement agency.

Complications of custody

Claiming the earned income credit can be particularly confusing for those dealing with child care issues.

When custody is shared, only the parent who has physically housed the child for more than six months can claim the credit. Sometimes, however, a child can be claimed by either parent.

This would be the case if you and your spouse lived with your daughter until July 1 and then separated. You shared custody of your daughter equally until your divorce became final in December. Since the daughter has lived with both of you for more than half the year, and neither parent exceeds the income limits for the credit, you need to decide who will claim the highest amount of credit available when a child is involved.

If you and your spouse can’t agree and each of you names your daughter in your credit application, the IRS has tie-breaker rules to determine which taxpayer receives the tax break.

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Deposit details

The tax credit can be claimed on any personal income tax return. The instruction booklet for each form has several pages and accompanying worksheets for credit.

In addition to the online support program, you can also find information and examples of filing in IRS Publication 596, Earned income credit. Taxpayers with specific questions or problems with filing credit can call the IRS at (800) 829-1040.

Military personnel should pay attention to special arrangements that might require them to calculate credit back and forth. Normally, combat allowances are not taxable, but service members and military women who received this income can now choose to count it if it helps them with their EITC claim.

Remember your condition

If you qualify for the EITC on your federal income tax return, you may also be eligible for a similar credit from your state. Twenty-six states and the District of Columbia, as well as New York City, offer their residents an EITC. If you qualify, the EITC can give you a good chunk of change.



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