Earned Income Tax Credit: How It Works and Who Qualifies

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The Earned Income Tax Credit (EITC) is a refundable tax credit that helps low- and moderate-income working families lower their tax bill — or even receive a larger refund. The credit ranges from $632 to $7,830 depending on your income, filing status, and number of qualifying children. This guide explains who qualifies, how to claim it, and what to avoid when filing.

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 decipher if you qualify for the EITC:

• Earned income can include wages, self-employment income, union benefits, and more.
• The EIC is a refundable tax credit designed to benefit people with low–to middle-incomes.
• This year, the credit ranges from $632 to $7,830.
• How much you get will depend on several factors such as income, tax-filing status and the number of children you have.
• Long-term disability benefits received before reaching the minimum retirement age may count as income for purposes of claiming the EITC.
• Income from capital gains, dividends, alimony, Social Security or unemployment benefits does not count as earned income.
• You can qualify for a lower tax credit if you don’t have children. Each qualifying child you claim increases the earned income and adjusted gross income (AGI) limits.

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 $66,819
• Have investment income below $11,600
• 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 EITC credit table breaks down the earned income and AGI limits:

Earned Income Tax Credit: Income Limits for Tax Filers

In addition to these income limits, you cannot have earned more than $11,600 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. In some cases, your child may not be eligible as a dependent for the purposes of claiming the EITC on your tax return. If your child doesn’t meet the relationship test, age test, residency test, or joint return test, you may not be eligible for the EITC.

More than one person claimed the child. If someone else claims your child as a dependent, you cannot claim them for the purposes of the EITC. You must make sure your child lives with you for at least half of the tax year and that you pay more than half of their living expenses.

The Social Security Number or last name doesn’t match. If your child’s Social Security Number or last name doesn’t match, they may not be eligible as a qualifying child for the EITC. 

Wrong filing status. You could be excluded from claiming the EITC if you claim the wrong tax status. For example, if you’re married but file as single or head of household, you may not qualify for the EITC credit. It’s essential to claim the right tax status to qualify.

Overreporting or underreporting your income or expenses. If you choose to overreport your earned income or underreport your adjusted gross income for the purposes of getting a higher Earned Income Tax Credit, this is known as tax fraud. Providing false information to the IRS is a crime and is punishable by law.

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

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