What is the Earned Income Tax Credit, and Do You Qualify?
National Earned Income Tax Credit Awareness Day
Today is National Earned Income Tax Credit Awareness Day. The Earned income tax credit (EITC) is the largest program available for people working with low- to moderate incomes. The IRS reported that approximately 25 million eligible filers were granted the EITC in 2013 and that the average EITC was $2,411. Millions of taxpayers still miss out on this tax credit. The IRS reports that only one in five qualified filers is eligible for the credit.
It is possible to wonder why a family with more than three children would not receive a tax credit of up to $6,728 in 2021. Many people eligible for the credit do not get it because they are new to the field or because their income is below the IRS filing limit. For the tax year 2021, that amount is $12,550 for singles and $25,100 for married filing jointly.
You may have had a lower income due to the events in 2021. However, you might be eligible for EITC now that you are no longer eligible. To get this credit, you must file your federal taxes in 2018.
You want to learn more about the EITC. These answers to your most pressing questions regarding the tax credit and details on how you might qualify.
What is the Earned Income Tax Credit?
EITC is a tax credit that can be refunded to taxpayers who earn low or moderate incomes from their job or self-employment. It may not eliminate your taxes, but you could also get a tax return for the credit amount if it exceeds the amount you owe.
Who can claim the Earned Income Tax Credit?
You may be eligible for EITC if your income meets the below requirements.
- All year, you are a U.S. citizen/resident alien.
- You must have a valid Social Security Number by the due date for your 2021 return (including extensions).
- If you are filing a joint return but are not separated from your spouse, you must meet certain conditions.
- Employment income is earned. Unemployment income doesn’t count.
- You may be eligible if you earn income from a home-based business or provide services.
- For foreign earned income, you can’t file Form2555
What is the income limit?
These limits are subject to adjustment each year. For the tax year 2021 your earned income and adjusted income must be below:
- $51,464 ($57.414 married filing together) with three or more qualifying kids
- $47,915 (53,865 for married filing jointly) and two eligible children
- $42,158 ($48.108 married filing jointly) for one qualifying child
- $21,430 ($27.380 married filing jointly) without qualifying children
How much credit do you have?
Your amount will depend on your income and the number of eligible children.
The maximum credits for the tax year 2021 are:
- $6,728 for three or more children who meet the criteria
- $5,980 for two children who meet the requirements
- $3,618 for one child
- $1,502 for children not eligible
What’s a Qualifying Child?
If a child meets the following four criteria, they are eligible:
- Age: Your child must be at least 19 years old if they are full-time students and any age if they are permanently disabled.
- Relationship: Your child can be your son, daughter or foster child. This includes all their children. You can also consider your sister, brother, half-brother, sister, step-sister, and their children.
- Your child must have been a resident of the U.S.A for at least half the year.
- Joint return: Your child cannot have filed a jointly returned. If they filed a joint return, they wanted to claim a tax refund and not because they were required to.