The Earned Income Tax Credit (EITC) is a federal tax credit that applies to people who work and earn under a designated income level or who are at a certain income level and have three or more qualifying children or dependents. Because the EITC eligibility requirements can be confusing, many people do not know they can file for it, and they miss out on this extra amount in their refund. People who do not normally have to submit a tax return may also qualify for this refund, so it is important for everyone to be aware of what it is and how to qualify.
Basic Qualifications for EITC
In order to qualify for the EITC, you must have some form of earned income. In some instances, disability retirement benefits are considered as earned income if you have not already reached the minimum retirement age. You, your spouse, and any qualifying children or dependents must have a valid Social Security number. You cannot file “married filing separately” to obtain the EITC and you must be a U.S. citizen or a resident alien for the entire 2010 tax year. You also cannot have more than $3,100 in investment income.
EITC Qualifying Income
If you are a single parent, to qualify for EITC your income, or your adjusted gross income (AGI), should not exceed the following amounts:
- $43,352 with three or more qualifying children
- $40,363 with two children
- $35,535 with one child
- $13,460 with no children
For parents who are married and filing jointly, your income or AGI should not exceed:
- $48,362 with three or more qualifying children
- $45,373 with two children
- $40,545 with one child
- $18,470 with no children
For those with qualifying incomes but who do not have children, they must also be age 25 or older or under age 65 by the end of 2010. You cannot be claimed as a dependent of another person, and you must have been living in the U.S. for at least six months in 2010.
Requirements for a Qualifying Child or Dependent
The requirements for a qualifying child or dependent can be confusing. Each of the following examples is considered a qualifying child or dependent.
- At the end of 2010, the child must be under age 19 or under age 24 if he is a full-time student.
- The child must have lived with you in the United States for at least six months in 2010.
- The child must be younger than the person claiming him unless the child is permanently disabled.
- A qualifying child's relationship to you must be as a son, daughter, foster child, legally adopted child, stepchild, brother, sister, stepbrother, stepsister, or a descendant of any of these relationships. Two examples of a qualifying child or dependent would be a grandparent raising a grandchild or a brother who is financially responsible for his disabled sibling.
- Only one parent or person may use the child as a qualifying dependent.
People often miss out on applying for the EITC because they are not sure who qualifies as a child or dependent. Under the rules, if you are legally responsible for a qualifying child or person who is permanently disabled and your income is within the qualifying amount, you should be able to apply for the EITC.
How Much Money Will I Receive From the EITC?
Depending upon how much your income is and how many qualifying children or dependents you have, you can earn up to the maximum of $5,666. People who qualify but do not have any qualifying children can earn a maximum of $457. The EITC can add a substantial amount of money to your tax return, so it is important that you check to see if you qualify.
Don’t Forget about Your State Tax Credit
Twenty-two states as well as some cities also offer a tax credit similar to the federal EITC. If you qualified for the federal EITC, you may also qualify for a state tax credit. You can find out if your state offers this tax credit by visiting the Internal Revenue Service’s website at irs.gov.
Whether or not you normally file a tax return, it is important to check to see if you qualify for the EITC for 2010. In 2009, many people missed out on this tax credit because they did not know about it or did not know that they qualified. The IRS makes it easy to check if you are eligible with their online EITC Assistant tool. Go to irs.gov and type EITC in the search box to use the assistance tool or to read more about this tax credit.
Sources:
Internal Revenue Service: EITC Eligibility Rules for 2010 Tax Year Outlined; Retrieved March 13, 2011
Internal Revenue Service: Disability and Earned Income Tax Credit; Retrieved March 13, 2011
Deanna Lynn Sletten - Deanna Lynn Sletten has been a freelance writer for newspapers, regional magazines and websites for 20 years. She specializes in the ...
