NEW YORK -- As tax season rolls around every year, new waves of confusion seem to accompany. From how much money you should pay to the IRS to how much of those taxes you will eventually end up getting back, this time of the year is often filled with jargon and intricacies that one may not know, understand, or simply forget.
One of those things that is often forgotten each tax season is the earned income tax credit (EITC). In fact, according to the IRS, one in five taxpayers eligible for EITC don't end up claiming it.
Just like the Child Tax Credit and the Child and Dependent Care Credit, the EITC can help you and your family have an injection of income, increase your savings, or help you pay your rent, which is why you should be familiar with it.
Here is a comprehensive guide on the little known EITC and its eligibility requirements.
What is the Earned Income Tax Credit (EITC)?
The Earned Income Tax credit (EITC) offers a tax break to low- and moderate-income workers and families. In other words, claiming this credit helps to reduce the amount of taxes you owe the IRS, or increase the refund amount you will get.
The Earned income Tax Credit has helped lift more than 5.6 million households out of poverty and is considered the country's largest "cash-based safety net" program, research shows.
Since the EITC is a refundable tax credit, that means even if you don't owe any taxes, you could still receive it as a refund.
How Does the EITC Work?
The Earned Income Tax Credit amount takes into account your tax filing status as well as how many children or dependents you have. Generally, the less you make, the largest your EITC will be. Families who are disabled are eligible for the biggest credit amounts. In 2022, 93 million Americans who claimed the Earned Income Tax Credit received an average of $2,541.
To claim the Earned Income Tax Credit, you must qualify and file a federal tax return.
You must file Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors.
If you have a qualifying child, you must also file the Schedule EIC (Form 1040 or 1040-SR), Earned Income Credit, to give the IRS information about them.
How Much Can You Get from the EITC?
The amount of taxes a person can get a refund on from the IRS varies by case. In general, the less you earn, the larger the credit. Also, families with children often qualify for the largest credits.
The 2023 Earned Income Tax Credit is claimed on taxes filed by April 15, 2024. The credit amounts are $600, $3,995, $6,604, and $7,430, depending on your filing states and how many children you have.
Who is Eligible for the EITC in 2024?
Low- to moderate-income workers with qualifying children may be eligible to claim the EITC if certain qualifying rules apply to them.
Some basic qualifying rules for the EITC are:
- Have worked and earned income under $63,398
- Have investment income below $11,000 in the tax year 2023
- Have a valid Social Security number by the due date of your 2023 return (including extensions)
- Be a U.S. citizen or a resident alien all year
- Not file Form 2555, Foreign Earned Income
- Meet certain rules if you are separated from your spouse and not filing a joint tax return
The easiest way to find out if you're eligible for the Earned Income Tax Credit is to check with the IRS itself. It has created a step-by-step calculator called EITC Assistantthat determines what—and how much— you're entitled to. You'll need to have your W-2 or 1099 forms on hand, plus any documents that detail your expenses as well as the amount of taxes you've withheld, or any income paid to you.
Alternatively, for more specific eligibility rules, click here.
Income Thresholds and Credit Amounts for 2024
To be eligible for this credit, you must meet the EITC income limits. You must have at least $1 of earned income, excluding pensions and unemployment benefits.
For the 2024 tax year (taxes filed in 2025), the earned income credit will range from $632 to $7,830, depending on your filing status and how many children you have.
Rules for Qualifying Children and Relatives
If you claim one child or more as part of your earned income tax credit, each must meet certain EITC eligibility requirements.
- The child can be your biological or adopted child, stepchild, foster child or grandchild. The child also can be your sibling, half sibling, stepsibling, or any of their children.
- They must be under 19 at the end of the year or younger than you or your spouse if you're filing jointly, or the child must be under 24 if they were a full-time student. There's no age limit for children who are permanently disabled.
- The child must have lived with you or your spouse in the U.S. for more than half the year.
Rules for Married Couples
In 2023, to meet EITC eligibility requirements, you can use one of the following statuses:
- Married filing jointly
- Head of household
- Qualifying surviving spouse
- Single
- Married filing separate
You can claim the EIC if you are married, not filing a joint return, had a qualifying child who lived with you for more than half of 2023, and either of the following apply:
- You lived apart from your spouse for the last 6 months of 2023
- You are legally separated according to your state law under a written separation agreement or decree of separate maintenance and you didn't live in the same household as your spouse at the end of 2023.
If you're unsure about your filing status, you can use the Interactive Tax Assistant.
Special Rules for Military Members
If you're a member of the military, there are two additional EITC eligibility requirements for you.
- Get nontaxable military pay such as combat pay or a housing allowance or subsistance allowance
- Were stationed outside the United States
Why the EITC Matters for Latino Immigrants in the U.S.
The Earned Income Tax Credit (EITC) holds a significant importance for Latino immigrants in the U.S. As a refundable tax credit, it provides crucial financial support to low and moderate-income workers, many of whom are Latino immigrants.
For this community, the EITC can serve as a vital lifeline, offering financial relief and assistance with essential expenses such as housing, healthcare, and education. In essence, the EITC not only addresses immediate financial needs but also contributes to the long-term socio-economic advancement of Latino immigrants and their communities in the U.S.
Bottom Line
As tax season rolls around once again, it is important to know what options are available for you and your case. Because of this, EITC may be a great option to either relieve the financial burden that paying taxes may bring upon you.
The EITC can play a crucial role in empowering low-to-moderate-income workers, including many Latino immigrants, to achieve their aspirations and goals.
For more information on this valuable tax credit, click here.
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