How to Claim the Earned Income Tax Credit

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One of the most popular tax credits in U.S., the Earned Income Tax Credit (EITC), is designed to leave some extra money in the pockets of regular Americans with low to middling incomes. There are however quite a few limitations, so we suggest you read our detailed guide below. It’s worth it. The credit can go from a few hundred to a few thousand dollars.

Not the Easiest Credit to Claim

The first condition to be able to claim this credit is that you must have earned money as an employee or from self-employment. If you have investment income, it has to be less than $3,100.

If you don’t have a child, you can only claim the EITC if you are between 25 and 65, have been living in the U.S. for at least 6 months of the tax year and are not a dependent of another person. If you have a child, other eligibility conditions apply to your child. He or she has to be under 19 years of age (24 if a student and regardless of age if disabled) and has to have lived with you in the U.S. for at least 6 months of the tax year.

Already tired of conditions? Wait, there are more. To claim this credit, your adjusted gross income (AGI) has to be less than $43,279 if you have at least three eligible children ($48,279 if married filing jointly), $40,295 if you have two children ($45,295 if married filing jointly), $35,463 if you have one child ($40,463 if married filing jointly) or $13,440 ($18,440 if married filing jointly) if you don’t have any children.

Finally, some good news. Let’s take a look at how much money you will get if you qualify for the EITC. If you’re the lucky parent of three or more children, you take home the big prize: your credit can go as high as $5,657. If you have two children, your EITC amounts to a maximum of $5,028. The credit gets lower if you have only one child (not more than $3,043) and you’ll almost feel punished if you don’t have any kids at all (EITC drops dramatically to a maximum limit of $457).

To figure out the exact value of the credit in your case, you can use the Earned Income Tax Credit Worksheet in the instructions of Form 1040 (1040 Instructions 2019), Form 1040A (1040A Instructions 2019) or Form 1040EZ (1040EZ Instructions 2019).

A nice feature of this credit is that it’s refundable, meaning that if it’s higher than your tax liability, you’ll still be paid with the difference.

Common Mistakes when Claiming the EITC

What mistakes do people usually make when filing for the EITC? The IRS would like you to be especially careful with checking if your child is eligible and with your filing status. If you are married you should not file as single or as head of household. Also, if you are married you cannot file separately from your spouse. Other common mistake is mismatching the social security numbers or the last name, so you should be careful with all of your details in order to properly claim the EITC.

An Added Bonus?

If you qualify to claim the EITC on your federal return, you may also be eligible for a similar credit on your local or state tax return. You should check with your local authorities to see if that’s the case for you.