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How to Know If You’re Eligible for the Earned Income Tax Credit

Tax season can be stressful for obvious reasons, but one way of making it brighter is receiving a big income tax refund from the government.

Those checks can mean a large return if you’ve been overpaying on your tax liability, but it’s usually up to the taxpayer to seek out all of the possible ways to get what is yours.

One commonly missed opportunity is taking advantage of tax credits for those that qualify.

And one of the largest tax credits available is the Earned Income Tax Credit.

The Earned Income Tax Credit, or EITC for short, allows you to receive hundreds (if not thousands) of dollars back from the federal government provided that you meet a set of requirements. These requirements are typically met if you have certain income and family-size requirements.

For instance, in 2016 the maximum EITC you can receive based on your 2015 income and family circumstances is:

  • $496 with no qualifying children
  • $3,305 with one qualifying child
  • $5,460 with two qualifying children
  • $6,143 with three or more qualifying children

That’s a significant chunk of change thanks to the EITC. Now that you’re familiar with what you can receive, you may be asking yourself: “Great, what do I need to claim the EITC?”

Continue reading for a list of important tips and information concerning your eligibility, including how you can begin claiming EITC when you file your income taxes.

Ten Things the IRS Wants You to Know About the EITC 

According to the IRS, you are eligible for the Earned Income Tax Credit if you worked during the most recent calendar year and if your income was $52,427 or less in 2015. (This figures change annually).

Four of five eligible taxpayers filed for and received their EITC last year. And if you want to join their ranks this year, here are 10 things the IRS says you should know.

  1. Re-Check Your Eligibility Each Year

If you haven’t qualified for the Earned Income Tax Credit last year, that doesn’t mean that you are permanently excluded. Life events like the loss of a job/income source, birth of new children, and recent divorce/marriage may help you qualify in this current year, so always be sure to review EITC rules and updates.

  1. The EITC Will Reduce Your Tax Burden and/or Put Cash Back In Your Pocket

The average Earned Income Tax Credit last year was $2,407, the IRS reports. Depending on how much money you owe to the government, the EITC can mean the difference between paying money to Uncle Sam—or rightfully receiving money back from the government.

Unlike tax deductions (which lessen your tax liability), tax credits like the EITC almost function like free money–it not only reduces the federal tax you owe, but it also could result in a refund.

Tax credits reduce your tax liability dollar-for-dollar; deductions only reduce the amount of your income that is subject to taxes. If you owe $500 in taxes but qualify for $1,000 in EITC, $500 is part of your refund check. A deduction of $1,000 may only reduce your tax liability subject to tax bracket you fall under.

  1. You’ve Got to Be In It to Win It

Just like the lottery, you can only be eligible for the EITC if you file a federal income tax return and specifically claim the credit (even if you’re not otherwise required to file).

Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet. If you’re filing online, many free tax filing services will prompt you for tax credits like the EITC.

  1. You Can’t Be Married But File Separate Returns From Your Spouse

One particular exclusion to qualifying for the Earned Income Tax Credit is if you and your spouse have decided to file “Married/Filing Separately.” This may come as a large financial blow to many taxpayers.

Some married taxpayers may want to file separately from their spouse for financial and personal reasons

For instance, if your spouse owes child support, owes delinquent student loans, or is having their wages garnished, it may be in your advantage to file “Married/Filing Separately” to avoid having your entire tax refund snatched away.

However, filing an EITC in this circumstance would exploit the EITC, as both partners may receive it. Hence, if you plan to use the “married filing separately” status on your 1040 income tax return, that tax-filing status automatically disqualifies you from receiving the EITC.

  1. Social Security Numbers are Mandatory

You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC.

  1. Some Level of Earned Income is Required

If you haven’t worked for the year and haven’t earned income, you are automatically disqualified for the EITC. Earned income that meets the criteria of the EITC is if you work for someone who pays you wages, you are self-employed, you derive income from farming, or—in special circumstances—you receive disability income.

  1. Children May Not Be Required

Children are not the sole requirement for qualifying for the EITC. Married couples and single people without children may qualify depending on their income level (and meeting the other guidelines). If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.

  1. Military Members Get Special Treatment

If you’re in the military, you may qualify for the EITC.

This is especially true if you’ve been dispatched to combat zones or have been stationed in a new base—the government understands that your residency requirements are out of your hands.

One special rule that applies to members of the U.S. Armed Forces is that you can elect to include your nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.

  1. Online Help is Available

The IRS has never made it easier to determine whether you qualify for the EITC.

The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.

  1. Free Tax Preparation Assistance is Nationwide

Hate doing taxes? You’re not alone.

The IRS offers free tax help through its Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. These are available all throughout the country and are staffed by people trained in taxes, including specialists who can help you claim your EITC if you meet certain requirements, including:

  • You’ve made less than $54,000/year
  • You have a disability
  • You have limited grasp of English

If you are preparing your taxes electronically, the software will figure the credit for you. To find a VITA/TCE site near you, click here.

For more information about the EITC, read the IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on the IRS website or by calling 800-TAX-FORM (800-829- 3676).

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