OK. Let me start by saying that if your adjusted gross income is going to end up in the six figures, you’re out. Go read this article about investing with Acorns, or this one about Credit Karma reviews, or this one about maximizing cash back with Rakuten.
Also, there are some “special situations” that we won’t be covering here. This is the easy version. You have kids, you might qualify for the earned income credit. Then, here is how to qualify for the earned income credit, or EIC.
Qualifications for EIC
So how, do you qualify for the EIC? Basically, have a low enough income, and have some kids, while working.
- Your Income Has to Be Low Enough
- You need kids that are your dependents
- You have to have earned income (most earned income come from a job or home business)
- You have to have a valid Social Security Number, and so does the child or children you are using to claim the credit
- Or certain special situations. Since this is short version we are covering it here. Check out the IRS page.
Your income needs to be under $57,414. Your investment income has to be below $10,000.
Earned income includes all income and wages from working for someone else, yourself or a business or farm you own.
How Much Is the Earned Income Credit
If you qualify for the earned income credit, or EIC, this is how much of a tax credit you get. Keep in mind this is one of the few “refundable” credits meaning that if you have more credit than taxes owed, you can get a refund of the remaining credit as a cash payment from the IRS.
Maximum Allowable Income to Claim EIC
| Children Claimed | Maximum AGI Filing Single | Maximum AGI Married Filing Jointly |
| Zero (not covered here) | $21,430 | $27,380 |
| One | $42,158 | $48,108 |
| Two | $47,915 | $53,865 |
| Three | $51,464 | $57,414 |
Maximum EIC Credit Amount
| Zero Children | $1,502 |
| One Child | $3,618 |
| Two Children | $5,980 |
| Three Children | $6,720 |
How To Claim the EIC
To claim the Earned income credit, you’ll have to file the good ‘ol Form 1040. Then, you will also need to file Schedule EIC.
More tax articles are here.
For good measure, there is a flow chart on page 2 of Form EIC to help determine if your child qualifies for the earned income credit. If you are wondering what all of that is about, the EIC is a very sought after tax credit for its size and refundability, so more than a few people have tried to stretch the meaning of child to qualify. The rest of it is from politicians who are determined to insure that US tax dollars aren’t paid out to illegal workers and their children.
About the Author
By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes for the Finance Gourmet and other financial publications. The material provided on this website is for informational use only and is not intended for financial or tax advice. ArcticLlama, LLC, FinanceGourmet.com, and Mr. Nelson, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please note that material may not be updated regularly and that some of the information may not be current. Consult with your own tax professional when making decisions regarding your tax situation.