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How to Determine If You Qualify for an Earned Income Tax Credit

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Apr. 30 2021, Published 9:43 a.m. ET

Many Americans aren't aware of the credits and savings reserved for them when it comes to filing taxes. The Earned Income Tax Credit (EITC) was passed in 1975 to help low to moderate-income taxpayers keep more of their hard-earned money in their pocket. While the EITC was meant to be a temporary program, it still exists and is available for taxpayers.

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Unless you have a professional do your taxes for you, you might not know if you qualify to receive the earned income tax credit. Many factors make up whether or not a taxpayer is eligible. So, knowing before you file your taxes will help you tap into the rare inherent savings the IRS issues.

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What is the earned income tax credit?

The IRS issues a tax credit for those who have earned income from working at a job. Reserved for lower to middle-income individuals and families, the earned income tax credit can offset the taxes owed come tax time. The EITC can lower a family’s tax obligation or even result in a larger tax refund.

Based on tiers, credits are determined by how many children or dependents are claimed on your tax return.

  • $6,660 for families with three or more children
  • $5,920 for two children
  • $3,584 for one child
  • $1,502 households with no children (the tax year 2020 only)
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The maximum credit in the tax year 2021 increased to $6,728 for households with three or more children.

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Income limits determine who is eligible for an EITC.

While the number of children determines the size of the tax credit, the AGI (adjusted gross income) must be under specific limits correlating to the number of children. The EITC is calculated by the credit rate of the AGI. Taxpayers who earn the least income and have the largest families receive a more significant credit as a result.

The 2020 AGI must be less than these amounts using the single, head of household, or qualifying widower filing status:

  • $50,954 for families with three or more children
  • $47,440 for two children
  • $41,756 for one child
  • $15,820 households with no children 
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Married taxpayers who file joint returns only are also eligible for the EITC if they earn less than the following amount:

  • $56,844 for families with three or more children
  • $53,330 for two children
  • $47,646 for one child
  • $21,710 households with no children
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Also, income from investments can't exceed $3,650 for the tax year 2020—including interest, dividends, capital gains, and royalties.

Other requirements to qualify for the EITC

To receive the earned income tax credit, the form Schedule EIC needs to be attached to Form 1040. A few other IRS rules must be met to be eligible to claim the EITC: 

  • Have a valid Social Security number
  • Be a U.S. citizen or a resident alien all year
  • You (and your spouse) can't be claimed as a dependant by anyone else
  • You filed a Form 2555 (related to foreign earned income)

Taxpayers who don't have a qualifying child will need to meet further restrictions:

  • Must be at least age 25 but under age 65 at the end of the tax year
  • Have your main home in the United States for more than half the tax year
  • Married couples’ filing status can't be married filing separately
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