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What is the Earned Income Tax Credit?

Posted By Jim On 12/29/2009 @ 7:51 am In Taxes | 17 Comments

The Earned Income Tax Credit [3] is a refundable tax credit [4] that is designed to help low income workers. It was created in 1975 and has been expanded on several occasions, unlike some other tax laws, to continue to help low income taxpayers.

How does it work? If your earned income is under a certain amount, to be explained below, then you are given tax credits based on the number of qualifying children you have (including having no qualifying children). If you qualify, then you can get a tax credit on the following schedule based on the number of qualifying children:

  • $5,657 with three or more qualifying children
  • $5,028 with two qualifying children
  • $3,043 with one qualifying child
  • $457 with no qualifying children

2009 Earned Income AGI Limits

For 2009, to qualify for the EITC, your income must be less than:

  • Three or more qualifying children:
    • $43,279 for single filers
    • $48,279 for married filing jointly filers
  • Two qualifying children:
    • $40,295 for single filers
    • $45,295 for married filing jointly filers
  • One qualifying child:
    • $35,463 for single filers
    • $40,463 for married filing jointly filers
  • No qualifying children:
    • $13,440 for single filers
    • $18,440 for married filing jointly filers

Qualifying Children

This is where things can get complicated, as anything with the IRS is, because the rules on who qualifies as a qualifying child can get pretty specific. For example, they have to be under the age of 18 unless they are “permanently and totally disabled” or enrolled as a full-time student during some part of five calendar months (then they can be up to 23).

My advice? Use the EITC Assistant [5] to find out if you qualify. Most tax software will probably do this for you, since they’re designed to maximize your refund, but just in case it’s always important to be informed even if software is supposed to handle it for you.

(Photo: bostontaxhelp [6])

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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/what-is-the-earned-income-tax-credit.html

[3] Earned Income Tax Credit: http://www.irs.gov/individuals/article/0,,id=96406,00.html

[4] refundable tax credit: http://www.bargaineering.com/articles/refundable-tax-credits-vs-non-refundable-tax-credits.html

[5] EITC Assistant: http://www.irs.gov/individuals/article/0,,id=130102,00.html

[6] bostontaxhelp: http://www.flickr.com/photos/bostontaxhelp/3963430936/sizes/s/

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