Jonah JacobsBeing eligible for the Earned Income Tax Credit can be a big boost to your bottom line. If you aren’t sure what it is, however, you may have no clue if you qualify or how to take advantage of it.
Here are some frequently asked questions and answers about the EITC to bring you up to speed.
Earned Income Tax Credit FAQ
What’s the difference between a tax credit and a deduction?
Before getting into the specifics of the EITC, let’s talk about what separates a tax credit from a deduction.
A tax credit serves to reduce how much taxes you owe. A deduction, meanwhile, reduces how much of your income is taxable.
While both are beneficial, a tax credit like the EITC is extra advantageous since it can directly lower how much you have to pay to Uncle Sam or increase how much you’ll get back via a tax refund.
What is the earned income tax credit?
The EITC helps individuals or couples with a low earned income to pay lower taxes. While it seems mostly intended for people with children, you can be eligible if you don’t have any kids as well.
Who is eligible for the EITC?
Contrary to popular belief, you don’t need to have kids to take advantage of the EITC if you earned an income below a certain amount. Children can increase the amount of the credit, however, and can increase your refund as a result.
The basic eligibility requirements for the Earned Income Tax Credit are as follows:
- As its name suggests, you must have earned income.
- You must have a Social Security number.
- For the entire tax year, you must have been either a U.S. citizen or resident alien.
- You must be 25 to 65 years of age.
If you plan on claiming children on your taxes so you can benefit from the EITC, they will have to meet age, SSN, and residency requirements. The more children you have, the higher your income limit will be to qualify.
For those without children, adjusted gross income (AGI) must fall within the following limits to receive the EITC:
- Single filer – AGI less than $15,570.
- Married couple filing jointly – AGI less than $21,370.
How much is the EITC worth?
While the numbers can vary from year to year, here they are for 2019:
If you have no children and fall within the AGI limits, you can get up to $529 from the EITC. If you have qualifying children, here is the sliding scale:
- Three or more children – $6,557 maximum.
- Two children – Up to $5,828.
- One child – Up to $3526.
How can you get the Earned Income Tax Credit?
Even if you don’t have to file taxes or don’t owe anything, you’ll need to file your return to receive the EITC.
You can hire a professional to do all the paperwork if your situation is a bit complicated, or you can do it yourself online via the IRS’ Free File tool.
