What are the Earned Income Credit Qualifications?

earned income credit qualifications

What are the Earned Income Credit Qualifications?

The earned income credit is one of the most valuable credits for those with low or moderate incomes.

However, you will need to file an income tax return to claim it, even if you don’t necessarily owe anything in taxes.

There are a number of qualifications involved. If claiming, here’s what you need to know.

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What is the Earned Income Credit (EIC)?

The EIC is a tax credit available to claim for taxpayers earning either a low or moderate salary. For the tax year, the credit will be worth a maximum of $7,430.

It’s a tax credit, not a tax deduction, so the EIC will reduce the amount of tax you owe directly rather than your taxable income.

The philosophy behind the EIC is to counter social security taxes paid by taxpayers with lesser means.

Will You Qualify for the EIC?

The EIC has a range of qualifications attached, but they are pretty simple to understand. If you meet the following qualifications, you will be eligible to claim the EIC:

  1. Your filing status must either be single or married but filing jointly.
  2. You must have a form of earned income either through a job or through self-employment.
  3. Finally, you can’t earn more than $11,000 in investment income.
  4. You aren’t allowed to file Form 2555 or 2555-EZ, which are both designed for those claiming foreign earned income and exclusions.

However, if you are a member of the military or the clergy, there are special rules. Additionally, there are special rules for people with disabilities and people who have children with disabilities.

What are the Adjusted Gross Income Limits for the EIC?

The adjusted gross income limits are determined by your filing status and the number of qualifying children you have.

For single filers, the EIC table limits are:

0 Children - $17,640

One Child - Single $46,560

Two Children - $52,918

Three or More Children - $56,838

For taxpayers who are married and filing jointly, the limits are as follows:

0 Children – $24,210

One Child - $53,120

Two Children - $59,478

Three or More Children - $63,398

The number of children will also influence the maximum credit amount for the EIC.

For example, you can only claim the full $7,430 if you have three or more qualifying children. If you have no children, the maximum amount is $600.

The maximum credit is $3,995 and $6,604 for one and two qualifying children, respectively.

What are the Rules for Qualifying Children?

Your child must qualify in order to be eligible for EIC purposes. The following criteria must be true:

  • Your child must have a Social Security Number.
  • You must have a relationship with the child, whether they are your biological child, grandchild, adopted child, or stepchild.
  • At the end of the tax year, the child must be under the age of 19. However, they can be under the age of 24 if they are a full-time student.
  • If the child qualifies as totally and permanently disabled, there are no age limits.
  • The child must live with you or a spouse in the US for at least six months of the year.
  • Another taxpayer hasn’t claimed your child.
  • If you have any childcare expenses for dependent children, this will also become a factor.

How do I Claim the EIC?

You must file an income tax return with the Federal government to claim the EIC. You will also need to fill out and attach Schedule EIC to your tax return. On Schedule EIC, you will enter the information regarding your qualifying children.

Online tax filing has guidance to help you figure out and claim the EIC. The tax software does all the hard work for you by identifying tax breaks, putting the numbers on the correct forms, and computing just how big your credit will be.

Finally, did you get a previous EIC claim rejected? If you believe this is in error, you can appeal through Form 8862.

With such a valuable credit at stake, it’s well worth going to the earned income credit calculator to figure out what you could be eligible for when you file your taxes at the start of the year.