Earned Income Tax Credit Qualifications - EITC
The Earned Income Tax Credit (EITC) is a refundable credit for taxpayers who earn low or moderate incomes. This credit is meant to supplement the income you have earned through working, whether for yourself (self-employed) or for someone else. If you qualify for the Earned Income Tax Credit you can reduce your taxes and increase your tax refund. In general, the EITC allows more working people and their families to keep more of their hard-earned money.
Special Note for Single Workers with No Children: Single filers with no dependants are believed by the IRS to be the largest group of qualifying taxpayers who do not claim the EITC on their tax returns. Do not fall into this trap! Even if you are not married and have no children, you may still be able to claim the credit. You qualify for the credit as long as you are between the ages of 25 and 65 (on Dec.31 of the tax year in question), you earned income through work, and you meet the income limits specified below.
What is Earned Income?
"Earned" income is any money you were paid for doing work, whether you work for yourself or for someone else. Earned income includes:
- Salaries
- Wages
- Tips
- Self-employment net earnings
- Union strike pay
- Long-term disability benefits (before minimum retirement age)
- Nontaxable combat pay, if you choose to include it (learn more)
Earned income does NOT include:
- Child support and alimony payments
- Unemployment compensation
- Social Security benefits
- Pension payments
- Investment income: interest, dividends, and capital gains
Do I Qualify for the Earned Income Tax Credit?
The American Recovery and Reinvestment Act of 2009 included provisions that qualified more taxpayers for the Earned Income Tax Credit, so even if you didn’t qualify for the credit in a previous year, you may be able to claim it this year. The credit now begins to phase out at $12,470 for married couples filing jointly with no children, and at $21,420 for married couples filing jointly with children, and it phases out entirely for taxpayers with both earned income and adjusted gross income of:
- $13,440 with no qualifying children ($18,440 married filing jointly)
- $35,463 with one qualifying child ($40,463 married filing jointly)
- $40,295 with two qualifying children ($45,295 married filing jointly)
- $43,279 with three or more qualifying children (48,279 married filing jointly)
The maximum Earned Income Tax Credit per taxpayer is:
- $457 with no qualifying children
- $3,043 with one qualifying child
- $5,028 with two qualifying children
- $5,657 with three or more qualifying children
To qualify for the Earned Income Tax Credit you also must meet a number of other requirements:
- You, your spouse if married filing jointly, and any qualifying children you claim must each have a valid Social Security Number.
- You must have earned income (from employment or self-employment).
- Your filing status cannot be married filing separately.
- You must be a U.S. citizen or resident alien for the whole year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
- You cannot be the qualifying child of another person.
- Your qualifying child cannot be used by more than one person to claim the EITC.
- If you do not have a qualifying child, you must:
- be older than 25 but younger than 65 at the end of the year
- live in the United States for more than half the year
- not be the qualifying child of another person.
- You cannot file Form 2555 or 2555-EZ (Foreign Earned Income).
- Your investment income for the year must be less than $3,100.
Learn more about the EITC in IRS Publication 596, Earned Income Credit.
The EITC can be confusing. If you need more help determining if you are eligible for the Earned Income Tax Credit and figuring the exact amount of your credit, you might try using the IRS 2009 EITC Assistant.
Advance Earned Income Tax Credit - AEITC
If you expect to qualify for the EITC and you have at least one qualifying child, you may be able to begin receiving part of the funds from the credit in your paycheck. All you have to do is fill out a form and give it to your employer.
The maximum of Advance Earned Income Tax Credit you can receive from your employer is $1,826.
Use Form W-5, Earned Income Credit Advance Payment Certificate, to get Advance EITC payments.
Earned Income Tax Credit - EITC - Special Rules
Special EITC Rules for Members of the Military
Members of the Armed Forces do not normally include nontaxable pay, such as combat pay, in their earned income when calculating the Earned Income Credit. However, they may choose to include nontaxable pay in their earned income. This may have the effect of increasing their credit amount.
Special EITC Rules for Members of the Clergy
The housing allowance provided for a member of the clergy as a part of their pay is not normally included in taxable income, but it is reported as a part of their net earnings from self-employment. Therefore, the housing allowance (or rental value of the home) may be included in earned income for the purposes of calculating the Earned Income Tax Credit.
Special EITC Rules for Those Receiving Disability Benefits
Disability retirement benefit payments are included in earned income if you are younger than your minimum retirement age (the earliest age you could have received a pension had you not been disabled). After your minimum retirement age, any disability benefit payments will be considered taxable pension payments and may not be counted as earned income. Social Security Disability Insurance and private disability insurance payments for which you paid the premiums are not considered earned income for the purposes of calculating the EITC.
Special EITC Rules for Those Affected by Natural Disasters
If you lived in a qualified disaster area in 2009 and the amount of your earned income was greater in 2008 than in 2009, you may be able to use your 2008 earned income amount when calculating the Earned Income Credit.
Special EITC Rules for Adopted Children
If your child, adopted in 2009, has not yet been issued a Social Security Number, he/she may be assigned an Adoption Taxpayer Identification Number for tax purposes. Unfortunately, this number may not be used to claim a qualifying child for the Earned Income Credit. To claim the credit, you may file an amended tax return once your child has been assigned their SSN. Learn more about tax amendments.
Learn more about special rules for the EITC in IRS Publication 596, Earned Income Credit.
State and Local Earned Income Tax Credits
22 states, the District of Columbia, New York City, and Montgomery County, MD, all have their own Earned Income Tax Credits. If you are filing a tax return for one of these states, the eFile tax software will help determine if you qualify for a state or local EITC as well as the Federal EITC.
List of States with Local Earned Income Tax Credits
- Delaware
- District of Columbia
- Illinois
- Indiana
- Iowa
- Kansas
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Montgomery County, MD
- Nebraska
- New Jersey
- New Mexico
- New York
- New York City, NY
- North Carolina
- Oklahoma
- Oregon
- Rhode Island
- Vermont
- Virginia
- Wisconsin
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