Earned Income Tax Credit: How It Works and Who Qualifies

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The Earned Income Tax Credit (EITC) is a refundable federal tax credit designed to support low- and moderate-income workers. If you qualify, it can reduce your tax bill dollar for dollar — or result in a refund — with benefits ranging from $664 to $8,231 based on your income, filing status, and number of qualifying children.

What Is The Earned Income Tax Credit?

Earned income is money that you were paid for working for someone else or money that you made from running your own business or farm. This income is also subject to FICA taxes, which fund Social Security and Medicare, which are other types of tax obligations on earned income. 

The Earned Income Tax Credit (EITC) is a tiered tax credit based on your income, tax filing status, and number of dependents, among other factors. Here are some key takeaways to help you determine if you qualify for the EITC:

• What income counts: Earned income for the EITC includes wages, self-employment income, union strike benefits, and certain long-term disability benefits received before you reach minimum retirement age.
• What the credit is worth: The EITC ranges from $664 to $8,231 this year, depending on your income, filing status, and number of qualifying children.
• No children? You may still qualify: Taxpayers without children can receive a smaller credit, while the maximum credit increases with each qualifying child.
• Income limits rise with children: Each qualifying child increases the earned income and adjusted gross income (AGI) limits, allowing higher-income households to qualify.
• What doesn’t count as earned income: Capital gains, dividends, alimony, Social Security benefits, and unemployment compensation are excluded.

Who Qualifies for the EITC 

You must have earned income during the tax year to qualify for the IRS earned income credit. Here’s what else you need to do to qualify according to IRS.gov:

• Have worked and earned an adjusted gross income (AGI) under $68,875
• Have investment income below $11,950
• Have a valid Social Security number by the due date of your return (including extensions)
• You cannot file Form 2555, Foreign Earned Income
• Your filing status must not be married filing separately (unless specific qualifications are met)
• You must be a U.S. citizen or resident alien all year
• Neither your earned income nor your AGI can be higher than the limit for your filing status.
• Any qualifying child you claim must have a valid Social Security number that was issued before the due date for filing your tax return, including any tax extensions for which you qualify.

There are also special qualifying rules for military members, clergy members, and taxpayers with disabilities. Nontaxable military pay doesn’t have to be included in your income, but you can claim it if it helps with the EITC credit. And for clergy, the fair market rent of housing provided by the church must be included in income for purposes of the credit. Plus, disability benefits claimed before retirement age may qualify as income to be eligible for the EITC.

Income Limits and Credit Amounts

The earned income tax credit is only available if your adjusted gross income (AGI) doesn’t exceed certain limits, some of which are based on your filing status and the number of qualifying children you claim. This Earned Income Tax Credit credit table breaks down the earned income and AGI limits:

In addition to these income limits, you cannot have earned more than $11,950 in investment income to qualify for the EITC.

EITC Rules for Families with Children

Your filing status, which determines your tax bracket, must be one of the following: single, head of household, surviving spouse, or married filing jointly. If your tax filing status is married and you are filing separately, there are certain qualifications that must be met to claim the EITC.

The more qualifying children you claim on your tax return as dependents, the higher your EITC may be. Qualifying children aren’t limited to your biological children, and just because someone is your biological child doesn’t automatically mean he or she is your qualifying child. The qualifying child must meet the relationship test, age test, residency test and joint return test.

To qualify, a child must meet all four of these tests:

• Relationship test: Must be your child, stepchild, foster child, sibling, or their descendant
• Age test: Under age 19, or under 24 if a full-time student; no age limit if permanently disabled
• Residency test: Must live with you in the U.S. for more than half the year
• Joint return test: Cannot file jointly with a spouse unless only to claim a refund

If you are married and filing separately and have a dependent child who lived with you for more than half the year, you may be able to claim the EITC. You’ll need to meet the following to claim the EITC:

• You lived apart from your spouse for the last 6 months, or 
• You are legally separated according to your state law under a written separation agreement or a decree of separate maintenance and you didn’t live in the same household as your spouse

How to Claim the Earned Income Tax Credit

To claim the Earned Income Tax Credit, you’ll need to take the following steps:

• Determine your eligibility. You’ll first need to determine if you’re eligible to claim the credit. This means your tax filing status qualifies, you don’t earn over the income limits in the EITC credit tables, and your dependents meet the qualifying child criteria.
• File Form 1040 or 1040-SR. You can claim the EITC when filing your taxes on Form 1040 or 1040-SR (line 27). If you have qualifying children, you’ll also need to fill out Schedule EIC with information about each qualifying child.
• Use tax software. Most tax returns are completed and filed electronically, and using tax software can help you quickly see if you qualify for the EITC–and fill out the required forms to claim it on your return. Plus, tax software will do all the math for you, so you know exactly how the EITC will impact your tax refund.

Claiming the EITC Without Children

You’re not required to have qualifying children to benefit from the EITC. Although the credit will be limited, you can still claim it as long as you meet the basic criteria as well as these additional criteria:

• You lived in the U.S. for more than half the year
• No one else can claim you as a dependent or qualifying child on their income tax return
• You are younger than 65 and at least 25 at the end of the year

Maximizing Your Earned Income Credit

To make sure you get the most from the Earned Income Tax Credit, it’s essential to be as accurate as possible on your tax return. Here are a few tips of getting a higher EITC:

• Choose the correct filing status (head of household often gets the best outcome)
• Report all earned income accurately — wages, freelance, and business income
• Double-check dependent eligibility before claiming
• Use tax software or consult a preparer to avoid missed credits

Common EITC Mistakes to Avoid

The Earned Income Tax Credit is one of the most abused credits available–and the IRS is aware of the temptation to claim the credit falsely. Here are a few common mistakes to avoid when claiming the EITC–to avoid delays in your refund or audits from the IRS:

• Your child doesn’t qualify: To claim the EITC, your child must meet the IRS relationship, age, residency, and joint return tests. If they fail any of these requirements, you may not be eligible for the credit.
• Someone else claimed the child: Only one taxpayer can claim a child for EITC purposes. If another person claims your child as a dependent, you can’t use that child to qualify for the credit. Generally, your child must live with you for more than half the year, and you must provide more than half of their support.
• Incorrect Social Security information: Your child’s Social Security number and last name must match IRS records. Errors or mismatches can disqualify the child as a qualifying dependent for the EITC.
• Wrong filing status: Filing under the incorrect tax status can make you ineligible for the EITC. For example, married taxpayers who file as single or head of household instead of married filing jointly may lose eligibility.

• Incorrect income reporting: Overstating earned income or understating adjusted gross income (AGI) to increase your credit is considered tax fraud. Providing inaccurate information can result in penalties, repayment of the credit, and other legal consequences.

How to Maximize Your EITC

• Use IRS tools or tax software to confirm eligibility
• File Form 1040 or 1040-SR, and include Schedule EIC if claiming children
• Double-check that you meet income and filing status requirements
• Keep documentation for all income and dependent claims
• If unsure, consider working with a certified tax professional

Bottom Line: How the Earned Income Tax Credit Works and How to Claim It

The Earned Income Tax Credit is a refundable IRS tax credit that helps eligible low- and moderate-income workers reduce their tax bill or receive a larger refund. To qualify, you must have earned income, meet income and filing-status limits, and correctly claim any qualifying children. Filing accurately and avoiding common mistakes is key to receiving the full credit and preventing delays or IRS issues.

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