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Are you Eligible for Earned Income Tax Credit?

America’s federal tax system is designed in a way that benefits each and every individual, especially the low to moderate-income groups. One tax tool is the Earned Income Tax Credit (EITC). Let’s first understand what it is and how to be eligible for it.

earned income tax credit
Apart from having low to moderate income, there are several other factors that determine whether you qualify for earned income tax credit.

In this article

The earned income tax credit or earned income credit (EITC or EIC) by the United States federal government is a refundable tax credit for low to moderate-income working individuals, couples, and families, particularly the ones with children.

The amount of this benefit depends on the taxpayer’s income and the number of children at home. Even adults with no children are eligible for EITC. 

For the 2022-23 tax year, the EITC range is from $560 to $6,935. This depends on the status of the tax filer (single or joint), annual income and the number of children. If you are eligible for the credit, don’t forget to claim it when you file your taxes. Even if you did not claim your EITC in the last three years while filing your taxes, you can still file an amended tax return to get your money back. This is encouraged by the IRS.

What is the income limit to qualify for Earned Income Tax Credit?

For the taxes due in April 2023, the following are the limits to be eligible for EITC.

Number of childrenMaximum earned income tax creditMax AGI,single or head of household filersMax AGI, married joint filers
3 or more$6,935$53,057$59,187

Things to note

  • Your earned income and your adjusted gross income should be below the levels mentioned in the table.
  • Remember that the lesser your income, the higher your earned income tax credit is. 
  • Your earned income includes wages, salary, tips, investment income and any other taxable pay you get paid by your employer. Adjusted gross income is your earned income minus deductions.

How does Earned Income Tax Credit work?

For the financial year of 2022-23, you file your tax returns in 2023. Your earned income credit for this year ranges from $560 to $6,935, depending on your filing status and how many kids you have.

Remember that it is not necessary to have kids in order to qualify for EITC.

The earned income tax credit has many benefits. It not only reduces the tax amount you owe to the government, but you can also get a refund on the amount paid. Sometimes, the refund you get is actually more than the amount you paid in taxes. 

You also need to remember that if you claim your earned income tax credit now, it will take the IRS at least till mid-February to issue the refund. 

Who qualifies for Earned Income Tax Credit?

Apart from having low to moderate income, there are several other factors that determine whether you qualify for earned income tax credit. Given below are the rest of the eligibility criteria:

  • You must have earned at least $1 in a financial year. Pensions and unemployment don’t count here.
  • The income you earn from your investments in a year should be a maximum of $10,300 or less in 2022. When you claim your EITC for 2023 next year, it can’t be more than $11,000.
  • You can still qualify for and claim the earned income tax credit refund if you’re separated but still married. For this, you cannot file the tax return jointly, and your child has to live with you for at least more than six months. You should also have not lived with your spouse for the last six months before filing your tax returns. Either this, or you should have a valid separation agreement. 
  • If you claim the tax credit but have no children, you must be at least 25 years old and not older than 65. If you’re claiming jointly without a child, either you or your spouse needs to meet the age requirement. 

Things to keep in mind if you have children and are claiming EITC

If you have one or more children dependent on your income and tax credit, each of them need to qualify under the following criteria:

  • They can be your son, daughter, adopted, foster child, or even grandchild. 
  • The child can also be your brother, sister, nephew, niece, half-brother or half-sister, and even your stepbrother or stepsister. As long as they are dependent on your income. 
  • Your child must be 19 or younger by the end of the year, OR they must be under 24 if they are a full-time student. The child also needs to be younger than you and your partner. 
  • If your child or children are partially or totally disabled, they have no age limit applicable.
  • The child or children should have lived with you in the US for six months or more. 
  • You will also need a Social Security number for each child when you are claiming the earned tax credit. Make sure you use your child’s name and Social Security number exactly as they appear on the Social Security card, to avoid any errors. 
  • You also need the date of birth of each child. 

How to claim EITC if you don’t have kids?

By now you know that you can qualify for EITC even without kids, there are three more criteria that you need to adhere to:

  • You should have lived in the United States for at least six months.
  • Nobody should claim you as their child or dependent on their tax returns.
  • You must be at least 25 and not older than 65. 

What to do if you make an error while claiming your EITC?

Making any error in your EITC claims can cost you a lot. It delays your refund by several months. That’s not all, the IRS could also deny you the entire refund amount.

This is what will happen if the IRS denies your entire tax refund:

  • You will need to pay back any EIC amount you might have been paid in error, along with interest.
  • You might need to first file Form 8862, which is the Information To Claim Certain Credits After Disallowance, before you can claim the EIC again.
  • You could also be banned from claiming your EITC for the next two years if you are found by the IRS to have filed your return with “reckless or intentional disregard of the rules.”
  • In extreme cases, you could be banned from claiming EITC for 10 years, like if you are found to have committed fraud while filing your taxes or tax refunds.

This page is purely informational. Line does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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