Congress established the Earned Income Tax Credit in 1975 to help ease the federal income tax burden on low and moderate income working people. Naturally—since we’re talking U.S. federal tax code here—the rules governing who gets the credit and how much are not easily grasped. But it’s worthwhile to learn whether you qualify; you stand to gain as much as $5,891.
2012 EITC Overview
To qualify, earned income (by the IRS definition) and adjusted gross income must each be less than:
- $45,060 ($50,270 married filing jointly) with three or more qualifying children
- $41,952 ($47,162 married filing jointly) with two qualifying children
- $36,920 ($42,130 married filing jointly) with one qualifying child
- $13,980 ($19,190 married filing jointly) with no qualifying children
And your investment income must be $3,200 or less for the year.
The 2012 tax year maximum credit is:
- $5,891 with three or more qualifying children
- $5,236 with two qualifying children
- $3,169 with one qualifying child
- $475 with no qualifying children
Do You Qualify for the 2012 Earned Income Tax Credit?
Qualifying is more complex than this overview implies. To get a better evaluation and estimate of your EITC, the IRS provides an EITC Assistant. Or, click here to see the written EITC qualification rules directly from the IRS website. Finally, if self-abuse turns you on, download and study the 60-page IRS Publication 596, “Earned Income Credit”.
If you’re a visual learner, here’s a video from the IRS’ gripping Tax Tips series about qualifying for the EITC, as explained by Sarah, an alleged real life IRS employee. Sarah claims the average EITC last year was $2,200—that’s real money!