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At tax time, most of us have a similar goal: minimize our liability, and maybe even get some money back in the process. The Earned Income Tax Creditor EITC, is a tax incentive that might be able to help.
You may be eligible for the EITC if you earned a relatively low income in the previous tax year — especially if you have children. In this article, we’ll explore exactly how to qualify, how much credit you can get, and how to claim it on your tax return. Then we’ll follow up with some frequently asked questions about the Earned Income Tax Credit.
What Is Earned Income Tax Credit?
The Earned Income Tax Credit (EITC) is a refundable tax credit available for low- to moderate-income individuals and families — especially those with children. The EITC is claimed when you file your tax return. The maximum amount available for 2021 taxes is $6,728 , though the amount of credit you’ll receive depends on income, filing status, and how many qualifying children you have.
The EITC is a credit, not a deductionwhich means it directly reduces the tax dollars you owe. A deduction, on the other hand, reduces how much of your income is subject to taxation. In practice, this means it’s even better than a tax deduction in most cases, and could substantially lower your tax liability or get you a bigger refund.
Who Qualifies for the Earned Income Tax Credit?
The basic qualification for the EITC is simple, but as with all things IRS, there are lots of nitty-gritty specifics that can make or break your eligibility. The first requirement is right there in the name: you must have earned income. You’ ll also need to:
- Have a Social Security number.
- Have been a US citizen or resident alien for the entirety of the tax year in question.
- Be at least 25 years old, but not over 65.
If you don’t have children, you may be eligible based solely on a low income. In the 2021 tax year, you’ll need to have earned an adjusted gross income, or AGI, of:
- Less than…
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