May 31, 2024

What Is The Earned Income Tax Credit (EITC) & Who Qualifies?

Tax credits offer a well-deserved boost when it comes time to pay your taxes. And if you’re in a lower tax bracket, the earned income credit — also known as EIC or EITC — is one of the best.

The earned income tax credit is an anti-poverty credit that reduces the tax burden and provides valuable financial support. It’s particularly beneficial for people with qualifying dependents because the more people you take care of, the more money you can get.

Let’s explore who qualifies for earned income credit and how to claim it.

How does earned income credit work?

EIC works by providing a tax credit to low-income individuals and families who meet certain eligibility requirements. Taxpayers can claim the credit on their tax return, reducing the money they owe or even receiving a refund if the credit amount exceeds what they would pay.

The amount of the credit depends on factors such as earned income, filing status, and the number of qualifying children. If you have children who are still financially dependent, and they’re citizens of the U.S., they count toward higher credit.

Earned income credit qualifications: Are you eligible?

Here are the typical EIC qualifications:

Earned income

Can you get EIC with no income? Generally speaking, no. You must have earned income from employment or self-employment to qualify. This includes wages, salaries, and tips. You can see the income limit on the IRS website.

Filing status

You must file a tax return using one of the following statuses: single, married filing jointly, head of household, or qualifying widow(er) with a dependent child. Your filing status affects how much you receive.

Citizenship

You must be a U.S. citizen or resident alien for the entire tax year.

Investment income limit

While you can have some income from investments and still qualify, there’s a limit. In 2023, the investment income limit was $11,000.

Dependent children

If you have qualifying children, they must meet certain criteria, including age, relationship, residency, and dependency. Generally, they must be dependent on you, and they must be related by blood or legally. Siblings you’re responsible for, relatives with disabilities, and foster children all count.

Income limits

The income limits determine the maximum amount of earned income and adjusted gross income (AGI) you can have and still qualify for the credit. The number changes every year depending on status, children, and a few other factors. Here are the AGI limits for 2023 for reference:

Filing Status	Maximum AGI Limit (No Children)	Maximum AGI Limit (1 Child)	Maximum AGI Limit (2 Children)	Maximum AGI Limit (3+ Children)
Single/Head of Household	$17,640	$46,560	$52,918	$56,838
Married Filing Jointly	$24,210	$53,120	$59,478	$63,398

Refer to the IRS website for updated numbers.

Social security number

You, your spouse (if filing jointly), and any qualifying children must have valid Social Security numbers (SSNs) issued before the due date of the tax return, including extensions.

Does your child qualify?

You don’t have to have dependents to qualify for EIC, but it can earn you more if you do. Here’s how to know if you qualify for the child tax credit:

Age

The child must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year. Additionally, the child must be younger than the taxpayer (or the taxpayer's spouse if filing jointly).

If the dependent is disabled, there’s no age limit.

Social security number

The dependent must have a valid SSN issued before the due date of the tax return, including any extensions.

Qualifying relationship

The dependent has to be one of the following:

-Biological child

-Adopted child

-Stepchild

-Foster child

-Sibling

-Half sibling

-Stepsibling

-A descendant of any of these individuals

U.S. residency

The child must have lived with you in the U.S. for more than half of the tax year. Temporary absences, such as for school, vacation, or medical care, still count as living with you.

What if you have no children?

If you don’t have any dependents, you may still be eligible for the EIC. You just have to meet slightly different criteria — being between the ages of 25 and 65 and not qualifying as a dependent of another taxpayer. Additionally, you must meet the earned income and AGI requirements specific to individuals without a qualifying child.

How much can you earn from EIC?

Here’s a quick guide to what the EIC might credit you. Always check the IRS website for the most updated information. These numbers are from 2023, and they generally grow a little every year:

- No qualifying children. $600

- 1 qualifying child. $3,995

- 2 qualifying children. $6,604

- 3 or more qualifying children. $7,430

These amounts represent the maximum credit you can receive based on filing status and the number of qualifying children. Remember that the EIC is a refundable credit, meaning that if the credit amount exceeds your tax liability, you may receive the excess as a refund. Otherwise, the money goes toward what you owe in taxes, lowering the amount you have to pay.

How to claim earned income credit

To claim the EIC, taxpayers must follow specific procedures and provide necessary documentation to the IRS. Here's a brief guide on how to do it:

1. Determine eligibility

Before claiming the EIC, make sure you meet all the eligibility criteria. This includes having earned income, making less than the limit, and meeting the qualifying child requirements (if applicable).

2. Provide documentation

You must provide documentation to support your claim. This includes documents verifying earned income, like W-2 forms or self-employment income records. If you have a qualifying child, provide documentation that proves the child's eligibility, such as an SSN and proof of relationship and residency.

3. Calculate the credit

Use the EIC table or the EIC Assistant tool from the IRS to calculate the amount of credit you’re eligible for based on your income and family size.

4. Claim the credit

Once you’ve determined your eligibility and calculated the credit amount, claim the EIC on your tax return. Submit Form 1040, Form 1040A, or Form 1040EZ, depending on the individual tax situation. Make sure you accurately enter the calculated credit amount — this gives you the maximum benefit.

5. File your tax return

Finally, file your tax return with the IRS by the applicable deadline, usually April 15th. Include all necessary forms and documentation to support your claim for the EIC.

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