OVERVIEW
While millions of households already claim this special break for workers with modest incomes, the IRS says many more are eligible for the credit but fail to take it. The rules were recently liberalized, so more households are eligible. Take a few minutes to make sure you don't miss out on a credit that could bring you a refund check.
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Key Takeaways • If you earned less than $59,187 (if Married Filing Jointly) or $53,057 (if filing as an individual, surviving spouse or Head of Household) in tax year 2022, you may qualify for the Earned Income Tax Credit (EITC). • If you received more than $10,300 in investment income or income from rentals, royalties, or stock and other asset sales during 2022, you can't qualify for the EITC. • You must be 25 or older but under 65 to qualify for the EITC. You also must have lived in the United States for more than half of the year and can't be a dependent of another person. • You can earn up to $16,480 ($22,610 if married and filing a joint) with no qualifying children or up to $43,492 ($49,622 if married and filing a joint return) with one child, and earn even more with 2 or more qualifying children and still qualify for the EITC. |
Can I claim the Earned Income Tax Credit?
If you were married filing jointly and earned less than $59,187 ($53,057 for individuals, surviving spouses or heads of household) in 2022, you may qualify for this tax credit, or even for a refund check. It's complicated, but the Earned Income Tax Credit (EITC) is worth exploring if you or someone you know has modest earnings.
- The credit reduces any federal income tax you owe, dollar-for-dollar.
- If the credit completely eliminates your tax bill, and some credit is still left over, you can actually get a cash refund for the remaining amount.
To help you find out if you qualify, TurboTax asks simple questions so you can get the largest possible credit.
Tests for qualifying
First you have to qualify. Then your income has to be within stated limits. Finally, if you have one or more kids, they have to qualify too for you to receive a larger credit. If you pass all these tests, you could get a credit of as much as $6,935 for 2022 depending on your income and the number of children you have.
Once you determine that you qualify for the credit, use the Earned Income Credit table found in the instructions for Form 1040 to look up your income and find out the amount of credit you're entitled to.
You typically qualify if:
- You have income from earnings (for example, from a job, your own business, union strike benefits, certain long-term disability benefits).
- You did not receive more than $10,300 in investment income such as interest or dividends, or income from rentals, royalties or stock and other asset sales during 2022.
- You are single or, if married, do not use the Married Filing Separate status (there is an exception for 2021 for married couple filing separately).
- You, your spouse and children, if applicable, all have Social Security numbers.
- You and your spouse are not considered as a qualifying child of someone else.
- You are not excluding any income you earned in a foreign country on your return.
- You are a citizen or resident of the United States.
- You have dependents, or if you don't, you are at least 25 or older but under 65, not qualify as a dependent of another person and lived in the United States for more than half of the year.
How much can I earn and still qualify?
This credit is targeted at households with modest incomes, so if you earn "too much" you may not qualify. Just how much can you earn and still qualify? It depends on how many qualifying children you have (we'll define this in a moment). Those with the lowest income qualify for the biggest credits. Those with incomes above the phase-out threshold qualify for lower credits until they reach the point where the credit is eliminated completely. The rules have been liberalized to result in higher credits for many households, especially those with three or more qualifying children. The following table shows the 2022 income limits for receiving credits and the maximum 2022 credit amounts.
| If you have: | Your earned income (and adjusted gross income) must be less than: | Your maximum credit will be: |
|---|---|---|
| No qualifying children | $16,480 ($22,610 if married and filing a joint return) | $560 |
| 1 qualifying child | $43,492 ($49,622 if married and filing a joint return) | $3,733 |
| 2 or more qualifying children | $49,399 ($55,529 if married and filing a joint return) | $6,164 |
| 3 or more qualifying children | $53,057 ($59,187 if married and filing a joint return) | $6,935 |
TurboTax Tip: Qualifying children can include your son, daughter, stepchild, adopted child or a descendant, foster child, brother, sister, stepbrother, stepsister or a descendant of one of these, provided they are age 18 or younger as of the end of the year (or 23 or young if the child is a full-time student). A person who's permanently and totally disabled at any time during the year qualifies, no matter how old.
Special rules for tax years 2020 and 2021
The Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020 as a stimulus measure to provide relief to those affected by the pandemic. For tax year 2020, the CAA allows taxpayers to use their 2019 earned income if it was higher than their 2020 earned income in calculating the Additional Child Tax Credit (ACTC) as well as the Earned Income Tax Credit (EITC). For 2021, you are allowed to use your 2019 or 2021 earned income based on whichever one gives you the highest credit.
Does my child qualify?
To qualify, the child must be:
- Your son, daughter, stepchild, adopted child or a descendant.
- Your foster child, placed with you by an authorized agency or court order.
- Your brother, sister, stepbrother, stepsister or a descendant of one of these.
- Age 18 or younger as of the end of the year (unless the child is a full-time student, in which case the student must be 23 or younger). Exception: A person who is permanently and totally disabled at any time during the year qualifies, no matter how old.
- A resident with you in the United States for more than half of the year.
Example:
You and your sister live together. You are 30 and your sister is 15. When your parents died two years ago, you took over the care of your sister, but you did not adopt her. She is considered a qualifying child because she lived with you more than half of the year.
Who is an eligible foster child?
For the Earned Income Credit, a foster child is defined as an individual who is placed with you by an authorized placement agency or court order. The child must have lived with you for more than half of the year.
What about my welfare benefits?
The Earned Income Tax Credit has no effect on certain welfare benefits. Any refund you receive because of the EITC generally will not be considered income when determining whether you are eligible for, or how much you can receive from, the following benefit programs:
- Temporary Assistance for Needy Families (TANF)
- Medicaid and Supplemental Security Income (SSI)
- Food stamps
- Low-income housing
For more information on whether you qualify for the credit, use the TurboTax program. An overview is also available in Publication 962: Possible Federal Tax Refund Due to the Earned Income Credit.
For complete details, see IRS Publication 596: Earned Income Tax Credit (EITC).
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