The Earned Income Tax Credit: A Valuable Credit for Low Income Earners

Don't miss out on this valuable credit the federal government provides to low income working people to help them make ends meet.

By , J.D.

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 a refundable credit, which means you can collect it even if you don't owe any federal income tax. It's free money from the federal government.

The IRS administers the EITC, but you don't have to owe or pay any federal income taxes to qualify for it. But 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.

Who Qualifies for the EITC?

To qualify for the EITC, you must:

  • have a valid Social Security number
  • be at least 25 years old (19 for 2021 only)
  • be under 65 years old (except for 2021 there is no age limit)
  • live in the United States for at least half the year
  • not be someone else's dependent or child for EITC purposes, and
  • have at least $1 of 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, stepbrother, step-sister, or a descendant of any of them, like 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, 25 for full-time students during 2021).

For 2022 (the tax return you'll file in 2023), you qualify for the credit if your earned income is less than:

  • $16,480 ($22,610 if married filing jointly) with no qualifying children ($21,430 and $27,380 in 2021)
  • $43,492 ($49,622 if married filing jointly) with one qualifying child ($42,158 and $48,108 in 2021)
  • $49,399 ($55,529 if married filing jointly) with two qualifying children ($47,915 and $53,865 in 2021), or
  • $53,057 ($59,187 if married filing jointly) with three or more qualifying children ($51,464 and $57,414 in 2021).

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 $10,000 for 2021 and later, $3,650 for 2020), 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).

For 2021 only (the tax return you file in 2022), you can qualify for the EITC if you're separated but still married. You can't file a joint tax return, and your child must live with you for more than half the year. You also must have not lived with your spouse during the last six months, or you must have a separation agreement or decree.

The IRS has an 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. It can be as much as $6,935 for 2022. The maximum credits for 2022 are:

  • $560 with no qualifying children ($1,502 in 2021)
  • $3,733 with one qualifying child ($3,618 in 2021)
  • $6,164 with two qualifying children ($5,980 in 2021), or
  • $6,935 with three or more qualifying children ($6,728 in 2021).

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 for EITC

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 upfront.

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 VITA Locator Tool or call 800-906-9887.

You can get more information on claiming EITC at the IRS website.

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