The Earned Income Tax Credit is one way that low and moderate income families can save some money at tax time. The EITC is refundable, and can reduce the taxes working families owe to zero in certain circumstances. If your income comes primarily from working, and not investing, you may qualify.
The income levels change every year, but an expansion has been granted until 2017 that extends the credit to working families with three or more dependents. The IRS has set guidelines that can help you figure out if you qualify for the credit, and if so, how much you will get.
2014 Eligibility Requirements
In order to qualify for the EITC, all income from investments has to be less than $3,350 for the entire tax year. The following income thresholds for earned income and adjusted gross income apply to single tax filers (married filing jointly in parenthesis) and their dependents:
- $46,997 ($52,427) with three or more eligible children
- $43,756 ($49,186) with two eligible children
- $38,511 ($43,941) with one eligible child
- $14,590 ($20,020) with no eligible children
You can’t be married and file separately, or claim an exclusion for foreign earned income if you want to claim the Earned Income Tax Credit. Additionally, you can’t be claimed as a dependent on anyone else’s return, and you have to file a tax return to get the credit. For taxpayers without a qualifying child, the eligibility age requirements are 25 to 64 by the end of the year.
The amount you will receive depends on how many qualifying children you claim as well as your total annual income. The standards for 2014 are:
- $6,413 if you have three or more eligible children
- $5,460 if you have two eligible children
- $3,305 if you have one eligible child
- $496 if you have no eligible children
The Earned Income Tax Credit helps low income families every year, and can be an important credit to be aware of. You’ll save more of your hard earned cash and less will go to Uncle Sam.
Because money is deducted from your earnings before you see any of it, you can consider the EITC as a way to put more money back into your check. From Social Security and Medicare taxes, to your employer’s income tax withholdings, you’re having money taken out before you even have a chance to spend it. Use the EITC to put more of that money back into your wallet, and make tax time a little less stressful for everyone.