At tax time, most of us have the same objective: decrease our legal responsibility, and perhaps even get some a refund within the course of. The Earned Income Tax Credit, or EITC, is a tax incentive which may be capable of assist.
Chances are you'll be eligible for the EITC should you earned a comparatively low revenue within the earlier tax 12 months — particularly when you've got youngsters. On this article, we’ll discover precisely methods to qualify, how a lot credit score you will get, and methods to declare it in your tax return. Then we’ll observe up with some often requested questions in regards to the Earned Revenue Tax Credit score.
What Is Earned Revenue Tax Credit score?
The Earned Revenue Tax Credit score (EITC) is a refundable tax credit score out there for low- to moderate-income people and households — particularly these with youngsters. The EITC is claimed once you file your tax return. The utmost quantity out there for 2022 taxes is $6,935, although the quantity of credit score you’ll obtain will depend on revenue, submitting standing, and what number of qualifying youngsters you might have.
The EITC is a credit score, not a deduction, which implies it immediately reduces the tax {dollars} you owe. A deduction, however, reduces how a lot of your revenue is topic to taxation. In observe, this implies it’s even higher than a tax deduction generally, and will considerably decrease your tax legal responsibility or get you an even bigger refund.
Who Qualifies for the Earned Revenue Tax Credit score?
The essential qualification for the EITC is straightforward, however as with all issues IRS, there are many nitty-gritty specifics that may make or break your eligibility. The primary requirement is correct there within the title: you should have earned revenue. You’ll additionally must:
- Have a Social Safety quantity by the due date of your 2022 tax return (together with extensions).
- Have been a U.S. citizen or resident alien for everything of the tax 12 months in query.
- Be no less than 25 years outdated, however not over 65.
For those who don’t have youngsters, chances are you'll be eligible primarily based solely on a low revenue. Within the 2022 tax 12 months, you’ll must have earned an adjusted gross revenue, or AGI, of:
- Lower than $16,480 as a single filer.
- Lower than $22,610 for married {couples} submitting collectively.
In any other case, the revenue limits rely upon the variety of youngsters you might have — and the youngsters should meet all {qualifications}, which embody age and residency necessities, and a Social Safety variety of their very own.
2022 Revenue Limits for Earned Revenue Tax Credit score
Variety of Youngsters | Single or Head of Family | Married Submitting Collectively | ||
---|---|---|---|---|
No qualifying youngsters | $16,480 | $22,610 | ||
1 qualifying little one | $43,492 | $49,622 | ||
2 qualifying little one | $49,399 | $55,529 | ||
3+ qualifying little one | $53,057 | $59,187 |
Moreover, there are some special rules for navy and clergy members, as nicely those that earn choose sorts of disabilities benefits. For those who fall into one in every of these classes, undoubtedly try the hyperlinks — these guidelines will assist you decide whether or not sure monies could be claimed as earned revenue and utilized towards eligibility credit score.
How A lot Can You Get From the Earned Revenue Tax Credit score?
Though people with out youngsters have all the time certified for a small earned revenue credit score, it’s usually a lot lower than what’s supplied for these with youngsters. Whereas the 2021 tax 12 months noticed briefly elevated EITC quantities (for childless people) resulting from The American Rescue Plan Act, the 2022 EITC quantities are again to regular. In different phrases, the quantities for childless people and households are as soon as once more considerably decrease than these out there to filers with youngsters.
Most EITC Based mostly on Variety of Youngsters
Variety of Youngsters | Most EITC Quantity | |||
---|---|---|---|---|
0 | $560 | |||
1 | $3,733 | |||
2 | $6,164 | |||
3+ | $6,935 |
Tips on how to Get the Earned Revenue Tax Credit score
For those who’re eligible for the Earned Revenue Tax Credit score and able to see its impact in your return, the very first thing it's essential do is to file a tax return. You’ll want to do that even should you don’t owe any taxes or usually are not in any other case required to file — there’s no different strategy to declare the credit score.
You should utilize U.S. tax varieties 1040 or 1040-SR to assert the Earned Revenue Tax Credit score should you don’t have qualifying youngsters, however should you do have youngsters, you’ll want to incorporate Schedule EITC along with your 1040. You can even collect all of the necessary documentation and have a tax skilled do the paperwork for you, or benefit from the IRS online Free File device.
Needless to say should you declare the EITC, your tax refund could also be delayed. By legislation, the IRS can not difficulty EITC refunds earlier than mid-February.
If you're fearful about making errors whereas submitting, we extremely suggest utilizing tax software program like TurboTax, H&R Block or TaxAct.
Regularly Requested Questions (FAQs) in regards to the Earned Revenue Tax Credit score
You’ve received questions in regards to the Earned Revenue Tax Credit score, don’t fear — we’ve received solutions.
What's the Earned Revenue Tax Credit score and How Does it Work?
The Earned Revenue Tax Credit score (EITC) is a credit score supplied to people and households that earned a low revenue throughout the earlier tax 12 months. The quantity of credit score supplied is set by your submitting standing (single or married submitting collectively) and the variety of youngsters you might have — usually, the extra children you might have, the bigger the credit score you’ll be eligible for.
What's an Instance of Earned Revenue Tax Credit score?
For the reason that EITC is a credit score, moderately than a deduction, it comes immediately off your tax legal responsibility. In different phrases, in case you are getting again $2,000 and get an Earned Revenue Tax Credit score of $2,000, you'd obtain a complete refund of $4,000.
What are the {Qualifications} for Earned Revenue Credit score?
To qualify for the EITC for the 2022 tax 12 months, you should:
- Have earned an revenue underneath $59,187.
- Have funding revenue beneath $10,300.
- Have a sound Social Safety Quantity.
- Be a U.S. citizen or resident alien.
You'll be able to qualify for the EITC utilizing any of the next tax submitting statuses:
- Married submitting collectively
- Head of family
- Married submitting separate
- Qualifying widow or widower
- Single
What Disqualifies You from Earned Revenue Credit score?
A number of issues can disqualify you from receiving EITC, together with:
- Incomes greater than $59,187.
- Having funding revenue over $10,300.
- Submitting a Kind 2555 with the IRS, which is expounded to international revenue.
There could also be different disqualifying components. For those who’re undecided whether or not you qualify, it’s finest to seek the advice of with a tax skilled. The IRS has a Qualification Assistant device to assist decide your eligibility.
TWP contributor Dave Schafer has been writing professionally for almost a decade, protecting matters starting from private finance to software program and shopper tech. Reporting by Jamie Cattanach and freelancer Larissa Runkle is included on this story.