image description
Credits

Earned Income Credit

The Earned Income Tax Credit (EIC) is a refundable tax credit that reduces or eliminates the tax paid by low-income workers.

Amount of Credit

Tax year 2013 maximum credit:

  • $6,044 with three or more qualifying children
  • $5,372 with two qualifying children
  • $3,250 with one qualifying child
  • $487 with no qualifying children

Requirements to Claim Credit

  • You must have a valid Social Security Number (SSN).
    • An Individual Taxpayer Identification Number (ITIN) is not sufficient.
    • Your SSN card must not have "Not valid for employment" on it.
  • Your filing status must be single, head of household, qualifying widow(er), or married filing jointly.
  • You must be a U.S. citizen living in the U.S. more than half the year, or a resident alien for the entire year.
  • You cannot have foreign earned income.
  • You must have less than $3,300 in "disqualifying" income, which includes investment, rent, and royalty income.
  • Your adjusted gross income falls within certain levels, which vary by filing status and the number of qualifying children:
    • Single, head of household, qualifying widow(er) filers:
      • Three or more qualifying children: the credit begins to phase out when income reaches $17,550 and is eliminated when it reaches $46,227.
      • Two qualifying children: the credit begins to phase out when income reaches $17,550 and is eliminated when it reaches $43,038.
      • One qualifying child: the credit begins to phase out when income reaches $17,550 and is eliminated when it reaches $37,870.
      • No qualifying children: the credit begins to phase out when income reaches $8,000 and is eliminated when it reaches $14,340.
    • Married filing jointly filers:
      • Three or more qualifying children: the credit begins to phase out when income reaches $22,900 and is eliminated when it reaches $51,567.
      • Two qualifying children: the credit begins to phase out when income reaches $22,900 and is eliminated when it reaches $48,378.
      • One qualifying child: the credit begins to phase out when income reaches $22,900 and is eliminated when it reaches $43,210.
      • No qualifying children: the credit begins to phase out when income reaches $13,350 and is eliminated when it reaches $19,680.
  • You must have earned income.
  • You must not be the qualifying child of another person.
  • You must not be the dependent of another person.
  • You must be at least age 25, but under age 65.

Additional Requirements if You Have a Qualifying Child

  • The child must have a valid Social Security Number (SSN).
  • The child must be younger than you, unless the child is disabled.
  • The child must not have filed a joint return except to claim a refund.
  • The child's relationship to you must be any of the following:
    • Son or daughter
    • Stepchild
    • Eligible foster child
    • Sibling, half-sibling, or step-sibling
    • A descendant of any of the above, e.g, your grandchild
  • The child must be one of the following:
    • Under 19 at the end of the current tax year
    • Under 24 at the end of the current tax year and a student
    • Permanently and totally disabled at anytime during the year, regardless of age
  • The child must have lived with you in the United States for more than half of the current tax year. A child is considered to have lived with you if the child was born or died in the current tax year and lived with you the entire time he or she was alive. Temporary absences, including school, vacation, medical care, military service, or detention in a juvenile facility, count as time lived with you.
  • The child cannot be used by anyone else to claim EIC.
  • It is possible that one child might be claimed by two or more persons in one calendar year. In this event, the child will be the qualifying child of the parents first, and then the taxpayer with the highest adjusted gross income (AGI). If both of the child's parents claim the credit, the parent with whom the child resides the longest may claim the credit. If the child resides with both parents an equal amount of time, the parent with the highest AGI will claim the child for EIC.

Earned Income

  • Wages
  • Salaries
  • Tips
  • Other taxable employee compensation
  • Net earnings from self-employment
  • Disability pay reported as wages
  • Parsonage allowances
  • Meals and lodging furnished for the convenience of the employer
  • Voluntary salary deferrals
  • Military pay earned in a combat zone
  • Strike pay paid by a union
  • Statutory employee wages

Disallowance of EIC

Disallowance of EIC is usually due to math or clerical errors, reckless or intentional disregard of EIC rules, and fraud. If you have been disallowed for any reason other than a math or clerical error, you must file Form 8862 before claiming EIC again.

If you have been disallowed due to math or clerical errors for any year after 1996, it is not necessary to file Form 8862 with your tax return.

If you have been disallowed due to reckless or intentional disregard of EIC rules, you cannot claim EIC for two years after disallowance. If your EIC has not been reduced or disallowed again for any reason other than math or clerical errors, and you have previously filed Form 8862 since disallowance, you do not need to file Form 8862 again.

If you have been disallowed due to fraud, you cannot claim EIC for 10 years after final determination that your EIC claim was due to fraud.

For more assistance determining whether you are eligible for the Earned Income Tax Credit, use the IRS EITC Home Page.

For more information see IRS Publication 596.