Earned Income Credit

Earned Income Tax Credit (EITC)

The earned tax credit is a social welfare program that subsidies to taxpayers whose earned income is below certain thresholds. It applies only to taxpayers who have some amount of earned income from working for someone or owning a business, and it is refundable to the extent it exceeds the taxpayer’s federal income tax liability. The maximum amount applies over a certain income range and then diminishes to zero over a specified phase-out range. The basic rules to qualify for this credit are:

  • Having a Social Security Number valid for employment and
  • You must file as Single, Head of Household, Qualified widow (er), or Married filing jointly. You cannot file as “married filing separately”
  • Your investment income must be $ 3,400 or less (for 2015 tax year)
  • Both Earned Income and Adjusted Gross Income (AGI) must be no greater than: (For 2015 tax year)

1

  • Zero
  • $14,820
  • $20,330

2

  • One
  • $39,131
  • $44,651

3

  • Two
  • $44,454
  • $49,974

4

  • Three or more
  • $47,747
  • $53,267


Taxpayer with no qualifying children may claim this credit if they are over age 24 and below age 65, AND must resided in the United States for more than half of the year; AND cannot be claimed as a dependent or qualifying child on anyone else's return;

For taxpayers with qualifying children, each child you claim must have a Social Security Number that is valid for employment and must pass all of the following tests to be your qualifying child for EITC:

Relationship

  • Your son, daughter, adopted child1, stepchild, foster child2 or a descendent of any of them such as your grandchild
  • Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephew

Age

  • At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) and younger than 19
  • At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) younger than 24 and a full-time student
  • At the end of the filing year, your child was any age and permanently and totally disabled

Residency

  • Child must live with you (or your spouse if you file a joint return) in the United States4 for more than half of the year

Joint Return

  • The child cannot file a joint return for the tax year unless the child and the child's spouse did not have a separate filing requirement and filed the joint return only to claim a refund.

IMPORTANT: Only one person can claim the same child. If a child qualifies for more than one person and one of the persons is a parent or parents, the non-parent can claim the child only if their AGI is higher than the parent(s). If the child qualifies another relative and the parent AGI rules do not apply, the taxpayers choose. If more than one person claims the s ame child, IRS applies the tiebreaker rules. Read more about Qualifying Child of More Than One Person here.

Information obtained from the IRS.GOV website.