Do You Qualify for the Earned Income Tax Credit?

For low to moderate income families, the Earned Income Tax Credit is available to help reduce the amount of federal income taxes that you owe. The refundable credit is available to families who earn the majority of their income through working (opposed to investing) and can actually reduce the federal taxes to less than zero for qualified families.

Each year the eligible income level changes, and until 2017 there’s an expansion that applies to families who work and have three or more dependents. In order to determine if you are eligible the IRS has an excellent tool in place, which could also help you figure out how much your credit will be.

What Are the Rules for 2104?

For the current tax year, in order to qualify for the credit, your investment income must be less than $3,350 for the year. The qualifying thresholds for both your earned income and your adjusted gross income must be less than:

$46,997 ($52,427 for married, joint filers) with three or more eligible children

$43,756 ($49,186 for married, joint filers) with two eligible children

$38,511 ($43,941 for married, joint filers) with one eligible child

$14,590 ($20,020 for married, joint filers) with no eligible children

In addition, you can’t file “married filing separately”, or claim the foreign earned income exclusion. You also can’t be claimed as a qualifying child on anyone else’s return, and you are required to file an income tax for the year in order to receive the credit. If you don’t have a qualifying child, you must be between the ages of 25 and 64 at the year’s end.

How Much Credit Will I Receive?

If you qualify, the total credit amount is dependent on your annual income and the number of eligible children. For 2014, you can receive as much as:

$6,413 if you have three or more eligible children

$5,460 if you have two eligible children

$3,305 if you have one eligible child

$496 if you have no eligible children

The Earned Income Tax Credit is extremely valuable to low income families, in which every penny matters. The EITC helps keep more of your hard earned money in your wallet, and less you’ll pay to the government.

From the moment you being working, you start earning money towards paying taxes. Social Security and Medicare taxes are deducted from the first dollar you make, as well as income tax withheld by your regular employer. That’s money taken out of your paycheck before you even have a cent in your hand. The Earned Income Tax Credit can help you recover some of that cash when you file your taxes, helping to make the tax obligations a little less painful, especially for lower income families.