What is the Earned Income Tax Credit?
The Earned Income Tax Credit (EITC or EIC) is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements. You must also file a tax return even if you don’t owe any taxes or are not required to file. The EITC reduces the taxes you owe and may even give you a refund.
There are certain requirements you must meet in order to be eligible for the EITC. You must have earned income, whether it’s from working for someone or running your own business. You must also meet some additional requirements.
If you are claiming a child, your child must meet all the qualifying child rules for you (or your spouse if you file a joint return).
If you do not claim a child that qualifies you for the credit, you must meet these rules:
- You must have resided in the US for more than six months.
- No one else can claim you as a dependent on their tax return.
- Normally, you must be between the ages of 25 and 65 at the end of the tax year. However, for tax year 2021, there is an exception.
- The age maximum for those with no qualifying children has been eliminated.
- The age minimum requirement of 25 has been reduced to 19, unless you are a specified student who has a minimum age requirement of up to 24. For former foster children and youth who are homeless the minimum age is 18.
Income Limits for the EITC
There are limits on how much you can earn before you no longer qualify for the EITC. The number of children you are claiming will determine these limits.
The Income limits to receive EITC typically adjust upward each year and are noted in this table for 2021:
|Children or relatives claimed||Maximum AGI (filing as single, head of household, widowed or married filing separately*)||Maximum AGI (filing as married filing jointly)|
And the maximum amount of credit each year you can claim also adjusts each year:
The maximum amount of credit you can claim for 2021:
- No qualifying children: $1,502
- 1 qualifying child: $3,618
- 2 qualifying children: $5,980
- 3 or more qualifying children: $6,728
The credit amount received varies considerably due to income. If the credit is more than what you owe, it doesn’t just bring your tax bill to zero. This credit is refundable. It means you get the difference as a refund. For example, if according to the standard tax rate your tax due was $550, but your Earned Income Credit was $1,550, you would get a refund of $1000.
Read more about the Earned Income Tax Credit
Note: This article was originally written by Linda Jacob two years ago. It was updated by Jerry Zeigler in December 2021. Zeigler is a Navy veteran who serves service members with financial counseling and education. As an Accredited Financial Counselor®, he is a member of the Better Financial Counseling Network and is the owner of JZ Financial Management. As a tax professional and Enrolled Agent, he has a passion for helping taxpayers navigate taxes.