Everything You Need to Know About Earned Income Tax Credit (EITC)May 13, 2023
Earned Income Tax Credit (EITC) is an essential tax credit you can claim when filing your tax returns. Learn more about EITC here.
The US government cares for its citizens, and that is why they offer Earned Income Tax Credit to help low to moderate-income earners pay less tax or even get a tax refund. This helps reduce poverty in the US. However, not many people know about these tax credit or use it when filing tax return. To help you know what Earned Income Credit is, among other things, read on.
What is Earned Income Credit (EIC)?
This is a special tax credit that US citizens earning low to moderate incomes can claim when filing tax returns. The tax credit is deducted from the total tax you are supposed to pay the IRS. As a result, what you pay as tax is lowered, and you can even get a tax refund. With the tax credit, you can find that you don’t owe any tax, and IRS owes you. Most people are eligible for the tax credit, but they don’t how they can claim it.
Who is eligible for this tax credit?
The Earned Income Tax Credit can be claimed by working parents as well as individuals who don’t have children. However, there is criteria of picking qualifying children. Qualifying child(ren) must be your son, daughter or closely related to you. Also, the child must have lived with you in the US for more than six months in the last year. Furthermore, a qualifying child must be under the age of 19, or at any age if disabled.
In addition to that, your adjusted gross income will determine if you are eligible for the tax credit or not. You need to understand that this tax credit is to support working low to moderate income earners live a better life. Therefore, there are set income limits. If you don’t have a child, and you are earning a maximum income of $15,820 or $21,710 (married filing jointly), you can claim an EIC of up to $538. Also, if you have a single child and earning a maximum income of $41,756 (single) or $47,646 (married filing jointly), you can claim an earned income credit of up to $3,584. You can use the earned income tax credit table 2020 for more details.
How can you calculate and claim your EIC?
From the earned income credit table amounts for 2020, you can get an estimate of the EIC you can claim when filing your tax returns. However, you can use online tax credit calculators to calculate the amount of tax credit you can claim. But you must provide accurate information to get accurate figures.
When it comes to claiming the tax credit, you need to use Form 1040 to provide information about your qualifying child or children to the IRS. However, you can do it the smart way when you file your tax return online. You just need to answer a few questions and the online program will help you claim the EIC and other deductions you qualify for, and that will guarantee you a bigger tax refund.
With the above information, you can as well lower your tax or even get a tax refund by claiming Earned Income Tax Credit. The tax credit is to support low to moderate income earning parents and individuals. Therefore, take advantage of the EIC, and you will pay less tax or even get a good tax refund.