My income this year was very low. Can I take this Earned Income Credit?
If you were married and earned less than $37,263 ($35,263 for single or head of household) in 2009, you may qualify for this tax credit, or even a refund check. It is tough to qualify, but the Earned Income Credit (EIC) is worth exploring, if you or someone you know had low earnings this year.
The credit reduces any tax you owe, dollar for dollar.
If the credit reduces the taxes to nothing, you may actually get a refund for the rest of the credit.
First you have to qualify, then your income has to pass muster, and finally, if you have kids, they have to qualify. If you pass all these tests, you could get a credit of as much as $4,400, depending on 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 (or Forms 1040A or 1040EZ) to look up your income and find out the amount of your credit. TurboTax walks you through walks you through the entire qualifying process.
Do I Qualify?
You qualify, if:
You have income from earnings (e.g., from a job, your own business, union strike benefits, certain long-term disability benefits)
You did not receive more than $2,700 in interest or dividends, or income from rentals, royalties, or stock and other asset sales during the year.
You are married, and you are not using the Married Filing Separate status.
You, your spouse and children, if applicable, all have Social Security numbers.
You and your spouse are not being considered as a child on someone else’s return for purposes of the earned income credit.
You are not excluding any income you earned in a foreign country from your return.
Tax Deductible Home Loan Interest
You are a citizen or resident of the U.S.
If you have children, they qualify you.
If you do not have a qualifying child, you and your spouse (if filing a joint return) are between 25 and 65, not the dependents or children of anyone else, and you have lived in the U.S. for more than half of the year.
How Much Can I Earn and Still Qualify?
If you earn above a certain amount of money in the year, you may be disqualified for the earned income credit. Just how much can you earn? It depends on how many qualifying children you have (we’ll define this in a moment):
If you have: Then your earned income (and your AGI) must be less than: And your maximum credit will be:
No qualifying children $11,750 ($13,750 if married and filing a joint return) $399
1 qualifying child $31,030 ($33,030 if married and filing a joint return) $2,662
2 or more qualifying children $35,263 ($37,263 if married and filing a joint return) $4,400
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 he or she 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. Your sister is 15. When your parents died 2 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 all year.
Who’s 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 the same principal place of abode as you for over half of the year.
What About my Welfare Benefits?
The Earned Income Credit has no effect on certain welfare benefits. Any refund you receive because of the EIC 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
You can use the Free Tax Estimator provided by Turbo Tax Online to figure out your Earned Income Credit. Prepare and file your taxes with Turbo Tax Online and get all the deductions and credits you deserve!