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.
- 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 are able to use 2019 earned income amount in the calculation of the credit on the 2021 tax return if it is greater than the taxpayer's 2021 earned income amount. This election is made in the Basic Information section of the 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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