5 Things You Should Know About Earned Income Tax CreditMay 13, 2023
Most US citizens don’t know if they are eligible for earned income tax credit or not. However, in reality, many citizens are eligible for this tax credit, and can help ease your financial burdens. This earned income tax credit is available to support low and moderate income working parents as well as workers without children. Thanks to this tax credit, workers with low or moderate incomes can enjoy reduced tax liabilities or increased tax refund. To know more about EITC, here are 5 things you should know.
Can anyone claim the earned income tax credit? No, EITC is specifically for working persons mostly earning low or moderate incomes. It is for taxpayers aged 25 to 65 years; those with children and without children as well. From the EIC table chart, an individual or couple without children earning $15,270 or jointly $20,950 or less; respectively, are eligible for this tax credit, and can get tax credit of up to $519. Also, a married couple with children and earning an adjusted gross income of $54,884 or less can claim EITC. Such a couple with 3+ children can get EITC of up to $6,431.
2. Self-employed still eligible
Most taxpayers in the US think that self-employed persons are not eligible for EITC. However, that is not true, and you can take advantage of the credits. IRS considers all earned incomes eligible for credit. These incomesinclude net earnings from self-employment, wages, salaries, and tips. However, incomes such as child support, retirement incomes, unemployment benefits, social security benefits and alimony don’t qualify for earned income tax credit.
3. How much investment income can disqualify you?
Investment income still qualifies for tax credit, but should not exceed a set amount per year. If you earn income not exceeding $3600 in one year from your investments like rental properties, inheritance or stock dividends, you are eligible. However, if your investment income exceeds $3400, you will not qualify for EITC. However, this set amount can change year after year.
4. Situations that can change your eligibility
Tax eligibility terms change every year. Also, some situations can change, and affect your eligibility. If you get a new job, your earned income tax credit can change. You can earn more than the set amount making you ineligible. Also, a change in marital status, unemployment, loss of annual bonus or change of spouse’s employment status can affect eligibility for the EITC.
5. Easy way to claim EITC
If you want to get EITC, you need file your tax like a pro. Of course, you need help in this if you want to get the tax credit you deserve. Online tax filing is the best option either through tax software or electronic tax programs. These ways are more accurate, and will help you as a tax filer maximize your earned income credit.
EITC is one of the most valuable credits available to low and moderate income earners in the US. The tax credit offers a tax refund to these individuals or couples to ease their financial burdens. Use the above information to know if you are eligible, and when you want to claim the EITC.