What is the earned income tax credit (EITC)?
The earned income tax credit rating, besides known as the EITC or EIC, is a refundable tax credit for low- and moderate-income workers. For the 2021 tax year, the earn income credit ranges from $ 1,502 to $ 6,728 depending on tax-filing condition, income and number of children. In 2022, the range is $ 560 to $ 6,935. People without kids can qualify. If you fall within the guidelines for the citation, be surely to claim it on your return when you do your taxes. And if you didn ’ t claim the earned income citation when you filed your taxes in the last three years but you think you qualified for it, the IRS encourages you to amend anterior tax returns so you can get that money back.
The $ 1.9 trillion American Rescue Plan Act changed some of the rules around the EITC. These changes are noted below.
How does the earned income tax credit work?
here are some flying facts about the earned income tax recognition :
- For the 2021 tax year ( the tax return you ‘ll file in 2022 ), the earned income accredit ranges from $ 1,502 to $ 6,728 depending on your file condition and how many children you have .
- You can use your 2019 earned income rather of your 2021 earned income to calculate your EITC — but only if your 2019 income is higher than your 2021 income .
- You do n’t have to have a child in club to claim the earned income credit .
- The earned income tax credit rating does n’t good cut the measure of tax you owe — the EITC could besides score you a refund, and in some cases, a refund that ‘s more than what you actually paid in taxes .
- If you claim the EITC, the IRS can not issue your refund until mid-february by law .
Income limit for the earned income credit (EIC)
Below are the maximum earned income tax credit amounts, plus the soap you can earn before losing the benefit all in all.
2021 Earned Income Tax Credit
(for taxes due in April 2022)
|Number of children||Maximum earned income tax credit||Max AGI, unmarried or mind of family filers||Max AGI, married joint filers|
|0||$ 1,502||$ 21,430||$ 27,380|
|1||$ 3,618||$ 42,158||$ 48,108|
|2||$ 5,980||$ 47,915||$ 53,865|
|3 or more||$ 6,728||$ 51,464||$ 57,414|
2022 Earned Income Tax Credit
(for taxes due in April 2023)
|Number of children||Maximum earned income tax citation||Max AGI, single or head of family filers||Max AGI, married joint filers|
|0||$ 560||$ 16,480||$ 22,610|
|1||$ 3,733||$ 43,492||$ 49,622|
|2||$ 6,164||$ 49,399||$ 55,529|
|3 or more||$ 6,935||$ 53,057||$ 59,187|
- Both your earned income and your adjust gross income each have to be below the levels in the table .
- In general, the less you earn, the larger the gain income accredit .
- Your gain income normally includes occupation wages, wage, tips and other taxable pay you get from your employer. Your align gross income is your gain income subtraction sealed deductions .
- An important eminence for 2022 : You may notice that the credit available to persons with no children has significantly decreased in 2022. This is because the american Rescue Plan Act temporarily boosted it from $ 543 to $ 1,502 in 2021 ; this expansion has not been carried over to the 2022 tax year .
Who qualifies for the earned income tax credit?
Besides staying below the income thresholds noted above, there are other reservation rules and requirements. here are the big eligibility rules, but you can besides check out our quiz below for a promptly read on whether you might qualify for the earn income tax credit .
- You must have at least $ 1 of earned income ( pensions and unemployment do n’t count ) .
- Your investment income must be $ 10,000 or less .
- For the 2021 tax year, you can qualify for the EITC if you ’ ra separated but still married. To do therefore, you can ’ metric ton file a joint tax revert and your child must live with you for more than half the year. You besides must have not lived with your spouse during the last six months or you must have a separation agreement or decree .
- You must not have to file Form 2555, Foreign Earned Income ; or Form 2555-EZ, Foreign Earned Income Exclusion .
There are especial EIC rules for members of the military and the clergy, american samoa well as for people who have disability income or who have children with disabilities.
Kids and the earned income tax credit
If you claim one or more children as character of your gain income credit, each must pass sealed tests to qualify :
- The child can be your son, daughter, adopted child, stepchild, foster child or grandchild. The child besides can be your buddy, baby, stepbrother or half sister, stepbrother or half sister or any of their children ( your niece or nephew ) .
- The child must be under 19 at the goal of the year and younger than you or your spouse if you ‘re filing jointly, OR the child must be under 24 if he or she was a full-time scholar. There ‘s no age limit for kids who are permanently and wholly disable .
- The child must have lived with you or your spouse in the United States for more than half the year .
For each child you ‘re claiming with the EITC, you ’ ll besides need :
- A Social Security act ( be sure to use the child ’ second name and Social Security number precisely as they appear on the Social Security card ) .
- Their birthdate .
If you don’t have kids
You may be able to get the EITC if you don ’ t have a passing child but meet the income requirements for your filing status. To qualify, you must meet three more conditions :
- You must have resided in the United States for more than half the year.
- No one can claim you as a dependent or qualifying child on their tax tax return .
- For the 2021 tax class ( the tax render you file in April 2022 ), you must be at least 24 if you were a student for at least five months of the year, 18 if you were in foster care any time after turning 14 or were homeless in any taxable class, and at least 19 otherwise. besides in 2021, there is no maximal old age limit for the credit .
Consequences of an EIC-related error
not entirely does an error on your tax form delay the EIC part of your refund — sometimes for several months — but it besides means the IRS could deny the entire earn income citation. If the IRS denies your whole EIC claim :
- You must pay back any EIC sum you ’ ve been paid in erroneousness, plus interest .
- You might need to file Form 8862, “ information to Claim Earned Income Credit After Disallowance, ” before you can claim the EIC again .
- You could be banned from claiming EITC for the future two years if the IRS finds you filed your return with “ heedless or intentional ignore of the rules. ”
- You could be banned from claiming EITC for the adjacent 10 years if the IRS finds you filed your restitution fraudulently .
Most tax software walks you through the EITC with a series of interview questions, greatly simplifying the process. ( Plus, if you qualify for the EITC, you might be able to get free tax software. ) But remember : even if person else prepares your return for you, the IRS holds you responsible for all information on any return you submit .
Looking for the 2020 Earned Income Tax Credit?
2020 Earned Income Tax Credit
( for taxes due in May 2021 ) For the 2020 tax year, the gain income credit ranges from $ 538 to $ 6,660 depending on your charge condition and how many children you have .
|Number of children||Maximum earned income tax credit||Max earnings, single or head of family filers||Max earnings, joint filers|
|0||$ 538||$ 15,820||$ 21,710|
|1||$ 3,584||$ 41,756||$ 47,646|
|2||$ 5,920||$ 47,440||$ 53,330|
|3 or more||$ 6,660||$ 50,954||$ 56,844|
You can use either your 2019 income or 2020 income to calculate your EITC — you might opt to use whichever number gets you the bigger EITC.
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