For 2023 tax returns
Beginning in tax year 2022, the qualifications for the Earned Income Tax credit have returned to pre-2021 rules. The limit for investment income has been raised to $11,000.
To qualify for the credit, your adjusted gross income (AGI) must be below a certain amount, and you must:
- Have a social security number (SSN) valid for employment (if you're filing a joint return, your spouse also must have an SSN valid for employment) by the due date of your return (including extensions). If you don't have an SSN by the due date of your return (including extensions), you can't claim the EIC on either an original or an amended return, even if you later get an SSN. Any qualifying child listed on Schedule EIC (Form 1040) also must have an SSN valid for employment by the due date of your return (including extensions). If a child didn't have an SSN by the due date of your return (including extensions), you can't count that child as a qualifying child in figuring the EIC on either your original or an amended return, even if that child later gets an SSN.
- Have a filing status other than married filing separately. For 2021 and future years, married but separated spouses can choose to be treated as not married for EITC purposes. To qualify, the spouse claiming the credit cannot file jointly with the other spouse, cannot have the same principal residence as the other spouse for at least six months out of the year and must have a qualifying child living with them for more than half the year.
- Be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return
- Not file Form 2555 (related to foreign earned income)
- Not have investment income over $11,000. Investment income includes such items as taxable interest and dividends, tax-exempt interest, capital gain net income, and income from residential rental property.
- Have earned income from employment or from self-employment
- Not be a qualifying child of another person (if you're filing a joint return, your spouse also can't be a qualifying child of another person)
- Have a qualifying child who meets the age, relationship, residency, and joint return tests, and isn't treated as the qualifying child of another person. Or, if you don't have a qualifying child, you must:
- be age 25 but under 65 at the end of the year.
- not qualify as a dependent of another person; and
- live in the United States for more than half of the year
If you qualify for the credit, the amount of your EITC will depend on your filing status, whether you have a qualifying child, and if so, how many, and the amount of your wages and income last year.
2021 Tax Returns
The American Rescue Plan will make the following changes to the Earned Income Credit for tax returns filed for 2021:
- The minimum age to be eligible to take earned income credit decreases from 25 to 19 for taxpayers who do not have children and are not a full-time student.
- The minimum age is lowered to age 18 for former foster youth and qualified homeless youth.
- Eliminates the upper age limit of 65, making the EITC no longer subject to an age limit.
- The investment income threshold raises from $3,250 to $10,000.
- Increases availability of the EITC to returns without dependents by increasing the earned income amount from $543 (2020) to $1,500 (2021) and increasing the phase-out percentage and the phase-out amount.
- Taxpayer's may use 2019 earned income amount for calculation of the credit on the 2021 tax return if it is greater than the taxpayer's 2021 earned income amount. You can make this election in the Basic Information section of your account.
- Married but filing separate taxpayers can now claim the EITC. However, they must live with their qualifying child for more than half the year and either:
- Must not have the same principal residence as the spouse for at least six (6) months of the applicable year, or
- Are legally separated according to their state law under a written separation agreement or a decree of separate maintenance and do not live in the same household as their spouse at the end of tax year. (IRS Tax Tips)
For tax returns prior to 2021: Publication 596 is the IRS publication issued to help taxpayers understand Earned Income Credit (EIC). It includes eligibility requirements, worksheets, the EIC table, and several detailed examples. To access this publication, click here.
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