The Earned Income Tax Credit (EITC) is a tax credit that helps offset the cost of Social Security taxes for low-wage earners. For those who don’t make much money, Social Security taxes can be a hefty chunk of their income. The EITC helps them recoup some of those losses come tax time.Deal of the Day: Credit Karma Tax offers 100% free Federal and State tax filing with a Maximum Refund Guarantee and Audit Defense. Never pay a penny to file your income taxes. Read the Full Review Here
If you qualify for the EITC, you’ll need to fill out tax form Schedule EIC and attach it to your form 1040 or 1040A. When you file your taxes by hand, you’ll need to print off Schedule EIC separately, and then fill in the information it gives you on your 1040 form. But if you use a tax filing software like TurboTax or H&R Block, the software will let you know if you qualify for the EITC. It will then gather your information and fill out Schedule EIC for you.
But how do you know if you should look into this form, or if you might qualify for the EITC? Here’s what you need to know.
Table of Contents:
Qualifying for the EITC
The basic requirements for the EITC are:
- You must be a U.S. citizen or a full-year resident alien with a valid Social Security number
- You must have earned income from the year (including wages, salaries, or even income from self-employment)
- But you must also meet the EITC income limits for your family size
- You must not be a dependent on someone else’s return
- You must not be married filing separately
- You must not have more than $3,450 in investment income (for 2017)
If you meet these qualifications, you can move on to see if you meet the income qualifications for the EITC. Keep in mind that the income restrictions, as with most tax-related restrictions, change on an annual basis.
EITC Qualifying Income
For 2018, the EITC income limits are as follows:
|Filing Status||No Children||One Child||Two Children||Three or More Children|
|Single, Head of Household, or Widowed||$15,270||$40,320||$45,802||$49,194|
|Married Filing Jointly||$20,950||$46,010||$51,492||$54,884|
Remember, these limits are for your adjusted gross income, not your total gross income. So the EITC is calculated after some of the work you do on other tax forms like Form 1040, which give you your adjusted gross income for the year.
The EITC is a valuable credit, especially when combined with other deductions like the ones you get for having children. The total credit amount slides based on your income. The closer you are to that year’s limit for your family size, the smaller your EITC amount will be. The maximum credit amounts for 2018 are:
- $6,431 with three or more children
- $5,716 with two children
- $3,461 with one child
- $519 with no children
Keep in mind that to count children on your EITC form, they must be qualifying children. This means they must be your son, daughter, adopted child, stepchild, foster child or descendent of one of these children (such as a grandchild). Or they must be your sibling (half and step siblings also qualify) or a descendant of a sibling. The child must also:
- Be younger than both you and your spouse
- Be younger than 19 or younger than 24 and a full-time student or be of any age but be totally and permanently disabled
- Have lived with you and your spouse in the United States for more than half the year
- Cannot be claimed by another taxpayer
What’s on Schedule EIC?
If you think you could qualify for the Earned Income Tax Credit, you’ll want to work through Schedule EIC. It includes a variety of information on your children, including:
- Children’s names and Social Security numbers
- Children’s dates of birth
- Children’s current age and disability status
- Children’s relationships to you
- Number of months the child lived with you
Schedule EIC doesn’t actually calculate the amount of the credit for you. It just collects the information needed on your qualifying children. You’ll have to follow the instructions on form 1040 or 1040A to actually calculate the credit.
One thing to note: You don’t have to put more than three children on Schedule EIC even if you have more than three. The credit amount caps out at three children, so you won’t get more for adding additional children. If you have only one or two qualifying children, you put only their information on the form. If you have three or more, you can just stop at three.
Filing Schedule EIC
As with everything regarding your taxes, it’s important to file yours with all the correct forms. And this also goes for the EIC. You might think that you don’t need to fill it out, since you enter dependent information elsewhere when filing your taxes. However, the IRS notes that not returning this form with your taxes could delay the filing and fulfillment of your taxes. So it’s best to just fill out the form and send it in.
Again, most tax software options will allow you to fill out the EIC form when needed. In fact, if you qualify for the EITC, you are likely to qualify for free file programs available from a variety of tax software companies.
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