The Earned Income Tax Credit (EITC) is money the federal government provides to low income working people to help them make ends meet. The EITC is administered by the IRS, but you don't have to owe or pay any federal income taxes to qualify for it. However, to get the credit, you need to file a tax return and specifically claim the EITC. Many people who qualify for the EITC don't receive it because they fail to file.
To qualify for the EITC, you must
- be at least 25 years old, but under 65 years old
- live in the United States for at least half the year
- not be someone else's dependent or child for EITC purposes, and
- have earned income--such as wages, tips, or income from running a business--but not too much of it.
The income limit depends on your family size. The more "qualifying children" you have, the larger your income may be for qualifying purposes. A qualifying child can include your son, daughter, adopted child, stepchild, foster child, or a descendant of any of them, such as your grandchild, or your brother, sister, half brother, half sister, step brother, step sister, or a descendant of any of them such as a niece or nephew. The child must live with you at least half the year and be younger than 19 (24 if a full-time student).
For 2014, you qualify for the credit if your earned income is less than:
- $14,590 ($20,020 married filing jointly) with no qualifying children
- $38,511 ($43,941 married filing jointly) with one qualifying child
- $43,756 ($49,186 married filing jointly) with two qualifying children, or
- $46,997 ($52,427 married filing jointly) with three or more qualifying children.
Check the IRS website for the annually adjusted amounts.
If you have income other than earned income, such as unemployment payments, taxable Social Security payments, alimony, investment income (which can't exceed $3,200), or retirement benefits, you must add it toward the limit. You need not add government assistance you receive, such as food stamps, Medicaid, or Supplemental Security Income (SSI).
The IRS has a EITC Assistant tool on its website that you can use to see if you qualify.
How Much Can You Get?
The amount of your credit depends on your income. The maximum credits for 2014 are:
- $496 with no qualifying children
- $3,305 with one qualifying child
- $5,460 with two qualifying children, or
- $6,143 with three or more qualifying children.
If you owe any taxes for the year, your credit will first be subtracted from this amount, and the rest paid directly to you. If you owe no taxes, you'll be paid the full amount of the credit. Some workers have their credits prepaid through their employers as “negative withholding” from their paychecks.
The IRS online EITC Assistant can tell you how much you qualify for. If you don't want to go online, the instructions for Form 1040, 1040A, and 1040EZ contain a worksheet and earned income credit table you can use to determine the amount of the credit.
How to Apply
To claim the EITC, you must file an IRS income tax form, either: Form 1040, 1040A, or 1040EZ. If you have one or more qualifying children, you must complete Schedule EIC and attach it to your tax return. Schedule EIC provides the IRS with information about the qualifying children, including their names, ages, Social Security numbers, relationship to you, and the amount of time they lived with you during the year.
More than half the people who qualify for the EITC use a tax preparer to prepare their returns. You can use a paid preparer--many preparers will deduct their fee from your EITC payments rather than make you pay up front.
However, if you qualify for the EITC, you probably also qualify for free tax preparation through the IRS Volunteer Income Tax Assistance program (VITA). The VITA Program offers free tax help from IRS-certified volunteers. There are thousands of VITA sites located at community and neighborhood centers, libraries, schools, shopping malls, and other locations. To find a site, use the online the VITA Locator Tool or call 800-906-9887.
You can get more information on claiming EITC at the IRS website.