The earned income tax credit is a benefit the IRS has established for working people with low to moderate income. It is an important piece of tax education as it can help working class families save money on their tax return, and may even provide a refund.
The earned income tax credit is also known as the EITC or EIC. Along with the additional child tax credit (ACTC), the EITC is something that individuals can claim each year they file a federal tax return.
How do I qualify for the earned income tax credit?
In order to qualify for the credit you must be within certain income restrictions (more info, below). You also must meet certain basic rules as well as the rules established for those with or without a qualifying child.
Additionally, the EITC has special qualifications for members of the military, clergy and for taxpayers with certain types of disability income or children with disabilities. Good tax education programs can help explain these qualifications in more detail.
What are the income restrictions?
For 2017, the earned income and adjusted gross income (AGI) that was required for individuals to be eligible for EITC was dependent on the number of qualifying children (if any) claimed.
For those filing as “single”, “head of the household” and “surviving spouse”:
- Zero Qualifying Children Claimed = $15,010 or under
- One Qualifying Children Claimed = $39,617 or under
- Two Qualifying Children Claimed = $45,007 or under
- Three or More Qualifying Children = $48,340 or under
For those filing as “married filing jointly”:
- Zero Qualifying Children Claimed = $20,600 or under
- One Qualifying Children Claimed = $45,207 or under
- Two Qualifying Children Claimed = $50,597 or under
- Three or More Qualifying Children = $53,930 or under
Though the income restrictions are likely to be adjusted for the 2018 tax year, this should give you a fair idea if you may be potentially eligible or not.
What is a “qualifying child”?
A qualifying child is a tax education term for a child that meets the necessary qualifications for the EITC or ACTC tax credit. In order to have a qualifying child he or she must:
- Have a valid social security number
- Younger than 19, and younger than the individual that claims the child
- Younger than 24, and a full-time student
- Must live with you (or your spouse if filing a joint return) in the U.S. and for more than half of the year
- Represent a son, daughter, adopted child, stepchild, foster child or a descendent (i.e. grandchild)
- Represent a brother, sister, half-brother/sister, step brother/sister or a descent (i.e. nephew)
For a complete list of rules, including exceptions for children with disabilities and others, please visit: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/qualifying-child-rules
How do I claim the EITC on my tax return?
The federal tax return is not always easy to understand, especially if you are claiming additional tax credits. If you need tax education, consider using volunteer or paid tax preparers.
You will need to file a Federal tax return along with a Schedule EIC listing all the children you wish to claim. You will also need to file either the Form 1040A or Form 1040. Tax education experts can help you get the correct forms.
Those without a qualifying child may also be eligible for EITC. If that is the case you will need to include the Forms 1040EZ, or the 1040A or 1040.
The following documentation is required, so make sure you gather it in advance:
- Social Security cards (for you and your children)
- Birthdates of all persons listed on the Schedule EIC
- Income statements including W-2 and 1099, along with any social security, unemployment, investments or documents with taxes that were withheld.
- Recorded expenses that you can claim (tuition, mortgage interest, real estate taxes, etc)
- Copies of last year’s federal and state returns (if possible)
- Bank routing and account numbers for a direct deposit, if eligible for a tax refund
Common EITC Errors
It is important that you avoid critical errors that may designate you ineligible for the EITC tax credit. These mistakes are avoidable and could result in disqualification:
- Social security number or last name mismatches
- Under or over reporting of income and expenses
- Filing as “single” or “head of household” when actually married
- More than one person claiming the same child (only one parent can do so)
Levy Tax & Associates can assist with tax education, including preparing to file for the EITC. Set-up a consultation to receive more information by visiting levytaxhelp.com or calling 1-800-TAX-LEVY.