By H&R Block’s Leigh Mutert, CPA and hrblock.com Community Manager.
The Earned Income Credit (EITC or EIC) is a refundable tax credit
for lower-income workers with kids
Even if you owe $0 in taxes, you can get money back if you qualify
What is the Earned Income Credit?
The Earned Income Credit is valuable for lower-income taxpayers who work. This credit can be worth up to $5,666 off your 2010 taxes, depending on filing status, income and number of qualifying children. Remember, tax credit is a dollar-for-dollar reduction of the tax, this is much more valuable than a deduction of the same amount.
The earned income credit (EIC) is a tax credit for certain people who work and have low wages. It reduces the amount of tax you owe. The EIC may also give you a refund—it can mean money back to you even if you $0 in taxes! To be eligible you must have an earned income of less than $43,352 if filing as Single, $48,362 if Married Filing Joint. This Earned Income Credit Tax Credit Table can help you quickly determine how much your credit might be based on your income and number of dependent children.
One of the difficult concepts for rookie tax professionals and the general taxpaying public is the “refundable credit.” A high-profile example of a refundable credit is the Earned Income Credit. The EIC is refundable, so taxpayers can receive the credit as part of their refund — even if their tax has been reduced to zero.
What’s the point of the Earned Income Credit?
The Earned Income Credit is the largest poverty reduction program in the United States. These dollars have a significant impact on the lives and communities of the nation’s lowest paid working people, lifting more than 6.6 million people above the poverty line in 2009.
States with the highest average Earned Income Credit claim per taxpayer include: Mississippi, Louisiana, Alabama, Texas, Georgia, Arkansas, South Carolina, Arizona, Tennessee and North Carolina.
The Earned Income Credit is valuable for lower-income taxpayers who work. It can be worth up to $5,666 for 2010, depending on filing status, income and number of qualifying children.
Taxpayers can qualify for the EIC even if they don’t have qualifying children, but the rules are slightly different than for those with qualifying children.
To qualify for the Earned Income Credit, a taxpayer must:
– Have a valid Social Security number (SSN)
– Not use the married filing separately filing status
– Be a U.S. citizen or resident alien all year
– Not file a Form 2555 or Form 2555-EZ
– Have investment income of $3,100 or less
– Not be a dependent or qualifying child of another taxpayer
H&R Block has thousands of tax professionals nationwide to answer any questions you may have about how the Earned Income Credit affects you. Find an office in your area, or use H&R Block’s tax prep software to get started on your return online at home.
Note from Little House: Be sure to watch for my next H & R Block Product Giveaway for federal income taxes!
1 Comment
I see you left out one other requirement for those that don’t have qualifying child(ren). They must be between the ages of 25 and 64 as of the last day of the tax year in order to claim the EITC/EIC.
Not one time have I ever qualified for the EITC/EIC. The one time when I did qualify via income (That was when they first made it available for those with no qualifying children which 1994 was the first tax year for it), I didn’t qualify cause of age.
Speaking of the age think of age 24 is a very bad year cause if you are at the age of 24 as of the last day of the tax year, you can’t be claimed on your parent’s return unless all 5 tests including the Gross Income Test passes for your parents, but yet, you can’t claim the EITC/EIC either, if you don’t have at least one qualifying child.