At tax time, most of us have an identical aim: decrease our legal responsibility, and perhaps even get some a reimbursement within the course of. The Earned Income Tax Credit, or EITC, is a tax incentive which may be capable of assist.
It’s possible you’ll be eligible for the EITC for those who earned a comparatively low earnings within the earlier tax yr — particularly if in case you have youngsters. On this article, we’ll discover precisely the best way to qualify, how a lot credit score you may get, and the best way to declare it in your tax return. Then we’ll observe up with some steadily requested questions in regards to the Earned Earnings Tax Credit score.
What Is Earned Earnings Tax Credit score?
The Earned Earnings Tax Credit score (EITC) is a refundable tax credit score out there for low- to moderate-income people and households — particularly these with youngsters. The EITC is claimed if you file your tax return. The utmost quantity out there for 2022 taxes is $6,935, although the quantity of credit score you’ll obtain is dependent upon earnings, submitting standing, and what number of qualifying youngsters you will have.
The EITC is a credit, not a deduction, which implies it instantly reduces the tax {dollars} you owe. A deduction, however, reduces how a lot of your earnings is topic to taxation. In follow, this implies it’s even higher than a tax deduction most often, and will considerably decrease your tax legal responsibility or get you a much bigger refund.
Who Qualifies for the Earned Earnings Tax Credit score?
The fundamental qualification for the EITC is easy, however as with all issues IRS, there are many nitty-gritty specifics that may make or break your eligibility. The primary requirement is correct there within the title: it’s essential to have earned earnings. You’ll additionally have to:
- Have a Social Safety quantity by the due date of your 2022 tax return (together with extensions).
- Have been a U.S. citizen or resident alien for the whole lot of the tax yr in query.
- Be at the very least 25 years previous, however not over 65.
When you don’t have youngsters, chances are you’ll be eligible based mostly solely on a low earnings. Within the 2022 tax yr, you’ll have to have earned an adjusted gross earnings, or AGI, of:
- Lower than $16,480 as a single filer.
- Lower than $22,610 for married {couples} submitting collectively.
In any other case, the earnings limits rely on the variety of youngsters you will have — and the youngsters should meet all {qualifications}, which embody age and residency necessities, and a Social Safety variety of their very own.
2022 Earnings Limits for Earned Earnings Tax Credit score
| Variety of Kids | Single or Head of Family | Married Submitting Collectively | ||
|---|---|---|---|---|
| No qualifying youngsters | $16,480 | $22,610 | ||
| 1 qualifying baby | $43,492 | $49,622 | ||
| 2 qualifying baby | $49,399 | $55,529 | ||
| 3+ qualifying baby | $53,057 | $59,187 |
Moreover, there are some special rules for navy and clergy members, as effectively those that earn choose sorts of disabilities benefits. When you fall into certainly one of these classes, undoubtedly try the hyperlinks — these guidelines will provide help to decide whether or not sure monies might be claimed as earned earnings and utilized towards eligibility credit score.
How A lot Can You Get From the Earned Earnings Tax Credit score?
Though people with out youngsters have all the time certified for a small earned earnings credit score, it’s usually a lot lower than what’s supplied for these with youngsters. Whereas the 2021 tax yr noticed quickly elevated EITC quantities (for childless people) attributable to The American Rescue Plan Act, the 2022 EITC quantities are again to regular. In different phrases, the quantities for childless people and households are as soon as once more considerably decrease than these out there to filers with youngsters.
Most EITC Based mostly on Variety of Kids
| Variety of Kids | Most EITC Quantity | |||
|---|---|---|---|---|
| 0 | $560 | |||
| 1 | $3,733 | |||
| 2 | $6,164 | |||
| 3+ | $6,935 |
The best way to Get the Earned Earnings Tax Credit score
When you’re eligible for the Earned Earnings Tax Credit score and able to see its impact in your return, the very first thing that you must do is to file a tax return. You’ll want to do that even for those who don’t owe any taxes or aren’t in any other case required to file — there’s no different strategy to declare the credit score.
You should utilize U.S. tax varieties 1040 or 1040-SR to assert the Earned Earnings Tax Credit score for those who don’t have qualifying youngsters, however for those who do have youngsters, you’ll want to incorporate Schedule EITC together with your 1040. It’s also possible to collect all of the necessary documentation and have a tax skilled do the paperwork for you, or make the most of the IRS online Free File device.
Take into account that for those who declare the EITC, your tax refund could also be delayed. By regulation, the IRS can’t situation EITC refunds earlier than mid-February.
In case you are fearful about making errors whereas submitting, we extremely advocate utilizing tax software program like TurboTax, H&R Block or TaxAct.
Ceaselessly Requested Questions (FAQs) in regards to the Earned Earnings Tax Credit score
You’ve received questions in regards to the Earned Earnings Tax Credit score, don’t fear — we’ve received solutions.
What’s the Earned Earnings Tax Credit score and How Does it Work?
The Earned Earnings Tax Credit score (EITC) is a credit score supplied to people and households that earned a low earnings throughout the earlier tax yr. The quantity of credit score supplied is set by your submitting standing (single or married submitting collectively) and the variety of youngsters you will have — typically, the extra children you will have, the bigger the credit score you’ll be eligible for.
What’s an Instance of Earned Earnings Tax Credit score?
For the reason that EITC is a credit score, somewhat than a deduction, it comes instantly off your tax legal responsibility. In different phrases, in case you are getting again $2,000 and get an Earned Earnings Tax Credit score of $2,000, you’ll obtain a complete refund of $4,000.
What are the {Qualifications} for Earned Earnings Credit score?
To qualify for the EITC for the 2022 tax yr, it’s essential to:
- Have earned an earnings beneath $59,187.
- Have funding earnings beneath $10,300.
- Have a sound Social Safety Quantity.
- Be a U.S. citizen or resident alien.
You possibly can qualify for the EITC utilizing any of the next tax submitting statuses:
- Married submitting collectively
- Head of family
- Married submitting separate
- Qualifying widow or widower
- Single
What Disqualifies You from Earned Earnings Credit score?
A number of issues can disqualify you from receiving EITC, together with:
- Incomes greater than $59,187.
- Having funding earnings over $10,300.
- Submitting a Type 2555 with the IRS, which is said to overseas earnings.
There could also be different disqualifying components. When you’re undecided whether or not you qualify, it’s finest to seek the advice of with a tax skilled. The IRS has a Qualification Assistant device to assist decide your eligibility.
Penny Hoarder contributor Dave Schafer has been writing professionally for almost a decade, overlaying matters starting from private finance to software program and shopper tech. Reporting by Jamie Cattanach and freelancer Larissa Runkle is included on this story.
