The Earned Income Tax Credit is refundable, allowing eligible low to moderate income workers the opportunity to reduce their taxable income. If its reduced below zero, the taxpayer may receive a refund of the excess amount of the credit. The credit is adjusted each year to account for the cost of living, as well as the associated income limitations. To qualify to claim the EITC, you must meet certain tests. Those with qualifying children can claim the EITC by filing Schedule EIC with your tax return.
Eligibility
If you want to claim the EITC, you must meet the following eligibility requirements:
- You must have a valid Social Security Number
- You must be a U.S. Citizen or full-year resident alien
- You must have earned income, either form wages, salaries, self-employment, or other forms, which meet the income limitations for the EITC.
- You are not a qualifying child of another taxpayer
If you are married, but file a separate return from your spouse, you won’t be eligible to claim the EITC. Additionally, those who file Form 2555 or 2555-EZ, or have more than $3,400 in investment income in 2016 are also ineligible for the credit.
You do not need a qualifying child to claim the EITC, as long as you aren’t a dependent of any other taxpayer, are between the ages of 25 and 65, and live in the US for more than half of the year.
Qualifying Child
When you file Schedule EIC, you are claiming one or more qualifying children (up to three different children). A qualifying child meets the following requirements:
- Lives with you for over half the year
- Is under the age of 19 at the end of the year (24 if considered a full-time student)
- Does not file a joint return
- Is either your son, daughter, sibling, step-sibling, or legal foster child
A child can only be claimed by one taxpayer. If a child is eligible to be claimed by more than one person, the IRS must employ a tie-breaker rule.
The EITC amount increases with the addition of each qualifying child – but maxes at a total of three. The earned income limit that taxpayers can make in 2016 is up to $53,505. The credit can result in up to $6,269 for three qualifying children (the credit decreases with less children).
