Earned Income Tax Credit (otherwise known as EITC) is a credit for designed for low to moderate income citizens. A tax credit reduces the taxes you own and could also qualify you for a refund. In order to even have a chance at getting this tax credit, you must file a tax return even if you don’t owe the IRS a dime – and even if you’re not required to file. The IRS will not come to your door saying “Hey, you’ve got money!”… Nope, you have to claim it. If you don’t ask, you don’t get!
What exactly is classified as “Earned Income”?
It is all taxable income you have earned from working for someone – or from owning or operating a business or a farm.
Taxable Income also includes…
- Self-employment Net Earnings
- Union Benefits as a result of a strike
- Some disability benefits received prior to reaching minimum retirement age
To claim EITC Credit, you must meet ALL guidelines below:
- All filers must have a social security number valid for employment
- You must have earned some income for working for someone, running a farm or operating your a business
- You can’t have a filing status of ‘married filing separately’.
- You must have been a U.S. Citizen or resident the entire year (If you’re a non-resident, but married to a U.S. citizen or resident alien, then visit here for more info: Publication 519, U.S. Tax Guide for Aliens
- You can’t be another person’s qualifying child
- You can’t file for 2555 or 2555ez (which is foreign income related)
- You must meet earned income and adjust gross income (AGI) and investment income limits (these limits change yearly (see chart below)
EITC Income Limits for 2015
In addition, you must meet at least one of following criteria:
- Have a qualifying child
- And if you don’t have a qualifying child then you must:
- have been at least 25 years old ( but under 65) at the end of 2015
- lived in the US for more than half of the year in 2015
- and you cannot qualify as another person’s dependent
How is a qualifying child determined?
Your child’s EITC qualification is determined by ALL of there 4 checkpoints: Age, Relationship, Residency and Joint Return.
The child must at least meet one of the following requirements:
- Under 19 years old at the end of 2015, and if you’re filing a joint return, younger than you or your spouse
- Was a full-time student for at a minimum of 5 months in 2015 and under age 24 at the end of 2015 (and if you’re filing a joint return, younger than you or your spouse)
- Was permanently and completely disabled at any age and at any time during the year
The child must be:
- Your son or daughter, adopted child, step child, qualifying foster child or a descendant of them such as your grandchild
… Or …
- Your brother or sister, half brother, half sister, step brother, step sister (or a descendant of any one of them, for example a niece or nephew)
The child must have lived with you (or your spouse if filing jointly) in the U.S. for more than half the year 2015
The child must not have filed a joint tax return – and if they did – your child and their spouse must not have been required to file and only did so to claim a refund.
Well that’s a brief summary of what Earned Income Tax Credit is and how it works. Like I said from the beginning, if you don’t claim it, you won’t get it! So after reading this article, if you so much as even feel you qualify, then you might wanna go’on and get up and file that tax return (even if you’re not required to file) so that you can Get This Money! Depending on your situation, you could qualify for anywhere from $503 to $6,242!
EITC Income Limits & Range for 2015 Tax Returns
For more information on Earned Income Tax Credit, consult with a tax professional and also visit EITC Central.