Earned Income Credit (EITC or EIC)

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If you earn income and make less than $46,997 in 2014 ($52,427 if filing jointly), you may qualify for the earned income credit. This credit is refundable – meaning you may get more money in your refund than you had withheld from your pay. In fact, you may get money back even if you didn't have any income tax withheld from your pay.

The earned income credit can be substantial – up to $6,143.

The income limitations are highest for taxpayers with three or more children. To receive this credit, both your earned income and adjusted gross income must be less than:

  • $46,997 ($52,427 if filing jointly) if you have three or more qualifying children
  • $43,756 ($49,186 if filing jointly) if you have two qualifying children
  • $38,511 ($43,941 if filing jointly) if you have one qualifying child
  • $14,590 ($20,020 if filing jointly) if you have no qualifying children

Qualifying for the Earned Income Credit

To qualify for the earned income credit, you must have a valid Social Security Number (SSN). If your card or your spouse's card (if filing jointly) says Not valid for employment and you received a SSN so you could get a federally funded benefit, you cannot claim the credit.

You must not use the Married Filing Separately filing status. You must be a U.S. citizen or resident all year, unless you file jointly, one spouse is a U.S. citizen or resident alien, and you choose to treat the nonresident spouse as a U.S. resident. You cannot claim the earned income credit if you deduct or exclude foreign income or housing on Form 2555, or if you have investment income of more than $3,350. In addition, you cannot be the qualifying child of another person.

TaxACT calculates your earned income credit based on your wages and other earned income, your adjusted gross income, and the number of qualified children you have living with you.

A common mistake is to forgo claiming a qualifying child for the earned income credit because you have agreed to let the noncustodial parent claim the dependency exemption for that child. The dependency exemption and a qualifying child for the earned income credit are two separate issues. Only the parent with whom the child lives the longest can claim a child for the earned income credit. If the time is equal, the parent with the higher adjusted gross income takes the credit.

You may still qualify for the earned income credit if you do not have a qualifying child. You must be at least age 25, but under age 65. (If you're married, only one of you must meet the age test.) You cannot be the dependent of another person, and you must live in the U.S. more than half the year.

If you may qualify for the credit, TaxACT asks a few questions in the step-by-step interview and does all the calculations for you. If you have a qualifying child, TaxACT calculates the credit on Schedule EIC, Form 1040.


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