The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. Show
SHARE:
MoMo Productions / Getty Images 5 minute read Published March 24, 2022 Written by Sarah Foster Written by Sarah FosterArrow RightU.S. economy reporter Sarah Foster covers the Federal Reserve, the U.S. economy and economic policy. She previously worked for Bloomberg News, the Chicago Tribune and the Chicago Daily Herald. Sarah Foster Edited by Brian Beers Edited by Brian BeersArrow RightManaging editor Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. The Earned Income Tax Credit is a tax credit that provides a tax break for low-income workers and families based on their wages, salaries, tips, and other pay, as well as earnings from self-employment. The EITC has existed for decades but the IRS estimates that 1 out of 5 eligible Americans do not claim the credit. This year, thanks to President Biden’s American Rescue plan, the credit is more generous and open to more workers than ever. If you are eligible to receive the Earned Income Tax Credit, it will lower the amount of federal income taxes you are required to pay. If the credit you receive is worth more than the taxes you owe, you will get the rest of the money back through your federal income tax refund. The Earned Income Tax Credit is not considered income for any family or worker. Receiving the Earned Income Tax Credit will not change the amount you receive from any other Federal benefits, including unemployment insurance, Medicaid, SNAP (formerly food stamps), SSI, SSDI, TANF, WIC, Section 8, or Public Housing. To learn more about whether the EITC applies to you, the IRS has a question and answer tool that can help you determine your eligibility: IRS EITC Assistant. Tax information center: Filing: Credits Editor’s note: This article has been updated to reflect updates to the Earned Income Credit from the American Rescue Plan Act of 2021. The Earned Income Credit (EIC), otherwise known as Earned Income Tax Credit (EITC) is a valuable credit for low-income taxpayers who work and earn an income of a certain amount. This credit is highly valuable and is often missed—allowing you to keep more of your hard-earned money. Taking the time to check the Earned Income Credit eligibility can pay off, as the tax benefit can be worth up to $6,728 depending on your: (Keep in mind: The Earned Income Credit is refundable, so you can receive the credit as part of your refund.) Earned income includes:
What sources of income doesn’t qualify?
Earned Income Credit eligibilityYou’re probably wondering how to qualify for the Earned Income Tax Credit. Earned Income Credit eligibility is as follows:
Earned Income Tax Credit eligibility if you have no childrenIf you don’t have qualifying children, Earned Income Tax Credit eligibility is as follows:
Childless taxpayers have no maximum age limit for tax year 2021. (Previously it was 65.) Additionally, the minimum age to qualify is 19 years, or 24 years for a full-time student (previously it was age 25 regardless of student status). Earned Income Credit qualifications with one or more childrenEarned Income Credit qualifications with one or more children are as follows: Age — Your child is under the age of 19 or a full-time student under the age of 24 and is younger than you (or your spouse, if filing jointly). (If your child is permanently and totally disabled, the age requirements don’t apply.) Qualified foster youth and homeless youth ages 18 to 24 can now claim the credit even if you’re a student. Relationship — A qualifying child must be:
These rules also apply to relationships:
Residency — The child must live with you in the same main home within the U.S. for more than half of the year. This doesn’t include Puerto Rico or other U.S. territories or possessions. Exceptions are allowed for:
Citizenship — A qualifying child must be a U.S. citizen, U.S. national, or a U.S. resident. A child who is a resident of Canada or Mexico doesn’t qualify. Qualifying child and dependency requirement — Your qualifying child can’t be used by more than one person to claim the EIC. You don’t have to claim the child as a dependent. However, a married child is only a qualifying child for EIC purposes if you could claim the child as a dependent. Marital status — A qualifying child must not file a joint return unless both conditions are true:
EIC for separated spouses — Separated spouses, those with filing status of married filing separately, are now allowed to claim the EITC if: They live with a qualifying child for more than half the year, and either
Social Security number (SSN) requirement — You can claim the “childless” EIC even if your dependent doesn’t have a valid Social Security number for tax year 2021 and beyond. Previously, if you had a child who didn’t have an SSN, you couldn’t claim any EIC. Filing status — You, generally, can’t be married filing separately and claim the EIC. There is an exception for separated spouses, however. Earned income — You must have earned income to meet the qualifications for the Earned Income Credit. Unearned income (interest, sale of investments, pensions, and unemployment) doesn’t qualify. If you’re a military taxpayer with nontaxable combat pay, you can include the combat pay in income to calculate the EIC . The Earned Income Credit income limitsYour earned income and AGI must be less than these limits:
Investment income limit — The investment income amount limit is $10,000, adjusted for inflation annually beginning in tax year 2021. Investment income includes:
Filing state tax returnsIf you have to file a state tax returns, note that the Earned Income Tax Credit is only calculated on your federal return. Some states offer their own version of the credit, which may be based on the federal amount or calculated separately. Review the instructions for the state you’re filing. If you didn’t claim the EIC last year, can you amend your return and claim it?To claim the Earned Income Credit for last year, you must amend your return by filing Form 1040X by the later of these dates:
Returns filed before the due date — without regard to extensions, such as tax Form 1040 or Form 1040X — are considered filed on the due date. Note that if you now have a valid SSN but didn’t claim the EIC last year because you or your child had an ITIN, you may not go back and amend your return to claim the EIC for earlier years. What if you have an EIC error?An error when filling out the EIC portion of your return could delay your full refund. If the IRS denies your whole claim you:
EITC filers facing refund delays should file as they normally wouldTaxpayers who claim the EIC could have their refunds delayed until mid-February. Taxpayers should file as they normally would, even if they expect their refund will be delayed. The IRS still expects to issue most refunds in less than 21 days. More help with the Earned Income CreditIf you’re looking for more hands-on guidance with claiming the Earned Income Credit, H&R Block can help. Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to help you get back the most money possible. You can also check out our Coronavirus Tax Resource Center for up-to-date information on the tax impacts of the pandemic. Related TopicsCredits Dependents States Adjustments and deductions
Related ResourcesFiling for a Deceased Taxpayer If you need help handling an estate, we're here to help. Learn how to file taxes for a deceased loved one with H&R Block. Don’t Overlook the 5 Most Common Tax Deductions From retirement account contributions to self-employment expenses, learn more about the five most common tax deductions with the experts at H&R Block. New Baby, New House or New Spouse? How Major Life Changes Affect Your Taxes Getting married? Having a baby? Buying a house? Go through your life events checklist and see how each can affect your tax return with the experts at H&R Block. Spring Cleaning: Your Household Goods, Your Tax Deductions Donating household goods to your favorite charity? Learn the ins and outs of deducting noncash charitable contributions on your taxes with the experts at H&R Block. |