Low as well as moderate income earners experience financial challenges. They need to pay taxes, school fees, buy food, pay rent and other bills, but what they earn isn’t enough for all that. For that reason, low and moderate income earners are entitled to the Earned Income Credit(EIC) if they qualify by meeting all the set requirements. The credit aims to offer some relief when paying taxes, and some people can even get a tax refund.
What is EIC?
EIC is a special tax break for individuals who only make a low or moderate annual income. The amount of credit you can claim varies with several factors. First it varies with the annual income of an individual. Also, your filing status and the number of children or dependents will affect the amount you can claim for the earned income credit. It’s important to note that, if you have a qualified dependent or child, you will receive more credit than those without dependents. Wondering how to qualify for earned income credit? Here is the answer.
How to qualify?
First of all, you must have worked or earned an income that is considered low or moderate that year. In short, you must have earned $1 or more through wages, salary or self-employment. Also, income from dividends or your investments can help you get the credit. However, the investment income credit must be $3,600 or less for 2019 year, but in 2020 tax year it will be $3,650.
In addition, you have to be a US citizen or resident alien who lived in the US for the entire year. Most importantly you and your qualified dependents must have a valid SSN. When it comes to statuses, you cannot use married filing separately tax status. If you don’t have dependents, you don’t have to worry, you can still claim for EIC and get a refund, it all depends on your annual income.
Ages is also something you need to consider. If you don’t have a child, you will be eligible for earned income credit if you are aged 25 years and above, but under 65 years. However, if you have a qualifying child or dependent with a disability, there is no age limit when claiming for earned income tax credit.
Dependents that qualify for EIC
Before a child qualifies for the earned income credit, they must be a relative. This means that the dependent child must be a brother, sister, adopted child, grandson, or more. Also, the child must have a social security number and be aged 19 years or below, unless they are a student (under 24 years). However, if supporting a disabled child there is no age limit. It is also important to note that you can’t claim more than 3 qualifying children.
You can claim the earned income credit if you meet all the requirements above. The easiest way to file your tax returns and claim EIC is through online tax software. TurboTax and H&R Block are the leading tax software you can use to prepare and file your tax returns accurately, and get the maximum refund that you deserve.