Schedule EIC - Earned Income Credit
The Earned Income Tax Credit (EITC) sometimes called the Earned Income Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.
To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return.
The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.
To claim the earned income credit, you must have earned income. For the year you are filing, earned income includes all income from employment, but only if it is includable in gross income. Examples of earned income are wages, salaries, tips, and other taxable employee compensation. Earned income also includes net earnings from self-employment. Earned income does not include amounts such as pensions and annuities, welfare benefits, unemployment compensation, worker's compensation benefits, or social security benefits.
To claim the EIC with a qualifying child, you must have one or more qualifying children. A qualifying child is a child who meets certain relationship, residency, and age requirements. To meet the relationship test, the child must be your:
- Son, daughter, stepson, stepdaughter, or a descendant of any of them,
- Brother, sister, stepbrother, stepsister, or a descendant of any of them, or
- Eligible foster child (a child placed with you by an authorized placement agency).
An adopted child (or a child placed with you for adoption by an authorized placement agency) is treated as a biological child.
If two children lived with you and your AGI is less than $35,263 (if single) or $37,263 (if married filing jointly) or one child lived with you and your income is less that $31,030 (if single) or $33,030 (if married filing jointly) you may qualify for the earned income credit.
To claim the EIC without a qualifying child, you must meet three additional requirements: age, dependency, and residency. To meet the age test, you (or your spouse, if filing jointly) must be at least age 25, but under age 65 at the end of the taxable year. You meet the dependency test if no one else can claim you (or your spouse, if filing jointly) as a dependent on their return. If someone else can claim you (or your spouse, if filing jointly) as a dependent, but does not, you still cannot claim the EIC.
If no children lived with you your AGI must be less than $11,750 (if single) or $13,750 (if married filing jointly) to qualify for earned income credit.