Earned Income Tax Credit -Will you qualify for EITC?
Earned Income Tax Credit (EITC) is intended to help workers who have low to moderate income under $56,844. If you qualify for EITC, your tax can be reduced or you can receive a refund.
Earned Income Tax Credit Qualifications
To qualify for EITC, you must meet all these requirements:
- You must have a valid Social Security number (SSN) by the due date of your tax return. Your SSN must be valid for employment. Individual taxpayer identification numbers (ITIN), Adoption Taxpayer Identification Numbers (ATIN) or “Not valid for employment” SSN are not qualified for EITC.
- You must be a U.S citizen or a resident alien for the whole year.
- Your filing status must be single, qualified window(er), head of household, married filing jointly. You cannot be qualified for EITC if your filing status is married filing separately.
- You cannot file form 2555 relating to foreign earned income.
- Your investment income must be $3,650 or under.
- You must have earned income.
- If you have a qualifying child, your child cannot be claimed for EITC by more than one person.
- You cannot be a qualifying child of another person.
- If you do not have a qualifying child, you must be of age 25 or above, but under 65. You must live in the U.S more than a half of the tax year.
- Your adjusted gross income or your earned income must be under:
| 2020 tax return: | Single, window(er), head of household | Married filing jointly |
| If you have 3 or more qualifying children | $50,954 | $56,844 |
| If you have 2 qualifying children | $41,756 | $47,646 |
| If you do not have a qualify child | $15,820 | $21,710 |
You can use Assistant for EITC or Interact tax assistant to check out if you are qualified for
EITC.
Examples of Earned Income Tax Credit
Situation 1:
April is 64 years old. During the year of 2020, she received $8,000 in Social Security benefits, $7,000 taxable pension, $3,000 interest income on her savings account, and $4,000 from a part time job. She is not married and lived in the United States for the entire year. And she does not have a qualifying child. So, she files a single tax return. Her AGI is $14,000 ( $7,000 + $3,000 + $4,000). August’s earned income is $14,000 which is less than $15,820. And, her interest income of $3,000 is less than $3,650. So, she can claim EITC.
Situation 2:
May is 63 years old. During the year of 2020, she received $9,000 in Social Security benefits, $12,500 taxable pension, $3,500 interest income on her savings account. She is not married and lives in the United States for the entire year. And she does not have a qualifying child. So, she files a single tax return. Since her AGI of $16,000 ( $12,500 + $3,500 ) is more than $15,820, she cannot claim EITC.
Situation 3:
Jake and June are married and live in the United State for the entire year of 2020. Their 3 children of ages 8,10, and 12 live with them during the year. During the year, their earned income is $45,000. They also have $450 of interest income on their investment account. They file a joint return. Their AGI of $45,450 ($45,000 + $450) is less than $56,844. And, their interest income of $450 is less than $3,650. So, they can claim EITC. They also may qualify for Child Tax credit.
Qualifying child for EITC
A qualifying child can be your biological children, step-children, adopted-children, grandchildren, your siblings, your half-siblings or their descendants. In addition, they must be under 19 or a full time student under 24 at the end of the tax year and younger than you or your spouse if you are married. Or the child is permanently/totally disabled any time during the year at any age. The child must live with you in the United States for more than half of the tax year. Plus, the child cannot file a joint return for the tax year or only file a joint return to claim a refund of income tax withheld or estimated tax paid.
Questions and answers – Earned Income Tax Credit -Will you qualify for EITC?
1. What should you do if you reach your filing deadline, but you do not have a SSN?
You can request a 6 month extension to file your tax return. You can submit form 4868 for the 6 month extension filing.
2. What if you are married, but your spouse does not live with you in the last 6 months of the tax year?
You can claim as a head of household for your tax return and you may qualify for EITC if you meet EITC requirements above.
3. Can you qualify for EITC if you or your spouse is a nonresident alien for any part of the tax year?
You can claim EITC if one of the spouses is a U.S citizen or resident alien and you must file a married filing jointly tax return. Also, you must meet the AGI requirement above.
4. What is earned income?
Earned income includes wages, salaries, tips and other taxable employee pay. You can elect to include nontaxable combat pay in your earned income. Minister housing, strike benefits paid by unions to union members are included in earned income. If you file a married filing jointly return, at least one of the spouses must have earned income to qualify for EITC.
5. What income is not earned income?
Some income are not earned income including interest income and dividends, non-taxable pensions and annuities, railroad retirement benefits, disability benefits, alimony and child supports, welfare benefits, public assistance payments, non-taxable military pay, worker compensation benefits, unemployment compensation, nontaxable foster care payment and veteran’s benefits, earnings while being an inmate.
Sources:
Internal Service Revenue. Earned Income Tax Credit 2020. Accessed September 3, 2021.
