Earned Income Tax Credit

Jan 31, 2012 by

See the updated version of this post for tax year 2012: EITC 2012

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 taxes and IRS writers here—the rules governing who gets the credit and how much are not easily grasped. But it’s worthwhile to learn whether you qualify, because you stand to gain as much as $5,751.

From the IRS’s website, here’s an overview:

To qualify, earned income (by the IRS definition) and adjusted gross income must each be less than:

  • $43,998 ($49,078 married filing jointly) with three or more qualifying children
  • $40,964 ($46,044 married filing jointly) with two qualifying children
  • $36,052 ($41,132 married filing jointly) with one qualifying child
  • $13,660 ($18,740 married filing jointly) with no qualifying children

And your investment income must be $3,150 or less for the year.

The 2011 tax year maximum credit is:

  • $5,751 with three or more qualifying children
  • $5,112 with two qualifying children
  • $3,094 with one qualifying child
  • $464 with no qualifying children

Qualifying is more complex than this overview implies. To get a better evaluation and estimate of your EITC, the IRS provides an EITC Assistant.

If you’re a visual learner, here’s a video from the IRS’s torrid Tax Tips series about qualifying for the EITC, as explained by Christina, an alleged real life IRS employee. I notice Christina apparently does not regard as “families” married couples without children. Hmm.


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