How do I qualify for earned income credit?

How do I qualify for earned income credit?

| Feb 4, 2020 | Tax Law

For many people, tax time provides them with a large refund that they can use to pay for expenses that fall outside their regular spending. Some people may pay off debt or make a large purchase, such as buying furniture. Others may put the refund into a savings account or invest it. Most of these large refunds come from the earned income tax credit.

Some credits on your taxes are solely to reduce income and not going to come back to you as a payable refund amount. According to the IRS the EITC is a credit that is refundable, which means it does not reduce your income, but you can get it as a refund payment.

Not everyone can qualify for the EITC. As the name indicates, you must have earned income to get it. Your earned income must also be under a specific amount. Contrary to popular belief, you do not need to have a child to get the EITC.

You cannot get the credit if you file married filing separately. In addition, you, your spouse, if filing jointly, and any dependents must have valid Social Security numbers. The only exception is if you are married and filing jointly with a spouse who is a nonresident alien.

Besides having to earn income and having an earned income under a specific level, you also cannot have excessive investment income. The limit for 2019 is $3,600. The total income limit you can earn depends on your filing status, married filing jointly has a higher income limit, and the number of qualifying children you claim. For example, the lowest with zero children and filing as either head of household, qualifying widow/widower or single is $15,570, and the highest for married filing jointly with three or more children is $55,952.

Some additional rules for earning EITC are that you need to be between the ages of 25 and 65 years old, you home must have been within the U.S. for more than half of the tax year and you cannot be a dependent on anyone else’s taxes.