Earned Income Tax Credit (EITC): What Is It & Who Qualifies – NerdWallet

What is the earned income tax credit (EITC)?

The gain income tax accredit, besides known as the EITC or EIC, is a refundable tax credit for low- and moderate-income workers. For the 2021 tax year, the gain income credit ranges from $ 1,502 to $ 6,728 depending on tax-filing condition, income and issue of children. People without kids can qualify. If you fall within the guidelines for the credit, be indisputable to claim it on your refund when you do your taxes And if you didn ’ thyroxine call the earn income credit when you filed your taxes in the last three years but you think you qualified for it, the IRS encourages you to let it know so you can get that money back.

The $ 1.9 trillion American Rescue Plan Act changed some of the rules around the EITC. These changes are noted below.

How does the earned income tax credit work?

here are some quick facts about the gain income tax recognition :

  • For the 2021 tax year ( the tax return you ‘ll file in 2022 ), the earned income citation ranges from $ 1,502 to $ 6,728 depending on your filing status and how many children you have .
  • You can use your 2019 income alternatively of your 2021 income to calculate your EITC — but only if your 2019 income is higher than your 2021 income .
  • You do n’t have to have a child in order to claim the earn income credit .
  • The earned income tax credit does n’t just cut the amount of tax you owe — the EITC could besides score you a refund, and in some cases, a refund that ‘s more than what you actually paid in taxes .
  • If you claim the EITC, the IRS can not issue your refund until mid-february by law .

Income limit for the earned income credit (EIC)

Below are the maximum earned income tax credit amounts, plus the soap you can earn before losing the benefit raw.

2021 Earned Income Tax Credit

(for taxes due in April 2022)

Number of children Maximum earned income tax credit Max AGI, single or steer of family filers Max AGI, married joint filers
0 $ 1,502 $ 21,430 $ 27,380
1 $ 3,618 $ 42,158 $ 48,108
2 $ 5,980 $ 47,915 $ 53,865
3 or more $ 6,728 $ 51,464 $ 57,414

2022 Earned Income Tax Credit

(for taxes due in April 2023)

Number of children Maximum earned income tax recognition Max AGI, individual or head of family filers Max AGI, married joint filers
0 $ 560 $ 16,480 $ 22,610
1 $ 3,733 $ 43,492 $ 49,622
2 $ 6,164 $ 49,399 $ 55,529
3 or more $ 6,935 $ 53,057 $ 59,187
  • Both your gain income and your adjust gross income each have to be below the levels in the board .
  • In general, the less you earn, the larger the earn income accredit .
  • Your earn income normally includes subcontract wages, wage, tips and early taxable pay up you get from your employer. Your adjusted arrant income is your earn income subtraction certain deductions .
  • An important note for 2022 : You may notice that the credit available to persons with no children has importantly decreased in 2022. This is because the american Rescue Plan Act temporarily boosted it from $ 543 to $ 1,502 in 2021 ; this expansion has not been carried over to the 2022 tax class .

Who qualifies for the earned income tax credit?

Besides staying below the income thresholds noted above, there are other qualification rules and requirements. here are the big eligibility rules, but you can besides check out our quiz below for a quick read on whether you might qualify for the earn income tax credit .

  • You must have at least $ 1 of earned income ( pensions and unemployment do n’t count ) .
  • Your investment income must be $ 10,000 or less .
  • For the 2021 tax year, you can qualify for the EITC if you ’ rhenium separated but hush married. To do sol, you can ’ metric ton file a joint tax tax return and your child must live with you for more than half the year. You besides must have not lived with your spouse during the last six months or you must have a separation agreement or decree .
  • You must not have to file Form 2555, Foreign Earned Income ; or Form 2555-EZ, Foreign Earned Income Exclusion .

There are special EIC rules for members of the military and the clergy, deoxyadenosine monophosphate well as for people who have disability income or who have children with disabilities.

Kids and the earned income tax credit

If you claim one or more children as function of your earn income credit, each must pass certain tests to qualify :

  • The child can be your son, daughter, adopted child, stepchild, foster child or grandchild. The child besides can be your brother, sister, stepbrother or half sister, stepbrother or half sister or any of their children ( your niece or nephew ) .
  • The child must be under 19 at the goal of the class and younger than you or your spouse if you ‘re filing jointly, OR the child must be under 24 if he or she was a full-time scholar. There ‘s no age specify for kids who are permanently and wholly disable .
  • The child must have lived with you or your spouse in the United States for more than half the year .

For each child you ‘re claiming with the EITC, you ’ ll besides need :

  • A Social Security count ( be sure to use the child ’ s name and Social Security phone number precisely as they appear on the Social Security card ) .
  • His or her birthdate .

If you don’t have kids

You may be able to get the EITC if you don ’ t have a stipulate child but meet the income requirements for your filing condition. To qualify, you must meet three more conditions :

  1. You must have resided in the United States for more than half the class.
  2. No one can claim you as a subject or qualifying child on his or her tax return .
  3. For the 2021 tax class ( the tax render you file in April 2022 ), you must be at least 24 if you were a student for at least five months of the year, 18 if you were in foster caution any time after turning 14 or were homeless in any taxable class, and at least 19 otherwise. besides in 2021, there is no maximal age terminus ad quem for the citation .

Consequences of an EIC-related error

not alone does an erroneousness on your tax form delay the EIC depart of your refund — sometimes for several months — but it besides means the IRS could deny the entire earn income credit rating. If the IRS denies your wholly EIC claim :

  • You must pay back any EIC amount you ’ ve been paid in mistake, plus interest .
  • You might need to file Form 8862, “ information to Claim Earned Income Credit After Disallowance, ” before you can claim the EIC again .
  • You could be banned from claiming EITC for the following two years if the IRS finds you filed your render with “ heedless or intentional dismiss of the rules. ”
  • You could be banned from claiming EITC for the following 10 years if the IRS finds you filed your render fraudulently .

Most tax software walks you through the EITC with a series of consultation questions, greatly simplifying the process. ( Plus, if you qualify for the EITC, you might be able to get detached tax software. ) But remember : even if person else prepares your refund for you, the IRS holds you responsible for all information on any return you submit .

Looking for the 2020 Earned Income Tax Credit?

2020 Earned Income Tax Credit

( for taxes due in May 2021 ) For the 2020 tax year, the gain income credit ranges from $ 538 to $ 6,660 depending on your file status and how many children you have .

Number of children Maximum earned income tax recognition Max earnings, one or head of family filers Max earnings, joint filers
0 $ 538 $ 15,820 $ 21,710
1 $ 3,584 $ 41,756 $ 47,646
2 $ 5,920 $ 47,440 $ 53,330
3 or more $ 6,660 $ 50,954 $ 56,844

You can use either your 2019 income or 2020 income to calculate your EITC — you might opt to use whichever number gets you the bigger EITC.

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  • federal : $ 24.95 to $ 64.95. free interpretation available for simple returns alone .
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  • federal : $ 39 to $ 119. release interpretation available for simple returns only .
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  • union : $ 29.99 to $ 84.99. free adaptation available for bare returns only .
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