The Earned Income Tax Credit (EITC) is one of the most significant tax credits available in the entire IRS tax code. It is also simultaneously one of the most complicated and popular tax credits as well. So I thought I should provide a long overdue basic overview of what the Earned Income Credit is, including qualifications, qualified children rules, maximum amount, income limits, income tables, calculators, and more.
What is the Earned Income Tax Credit?
Let’s start with a basic description of the Earned Income Tax Credit, which is also commonly referred to as the EITC, Earned Income Credit, and EIC. The EITC is a significant tax credit for lower and lower-middle income taxpayers that rewards earned income, particularly for those with children. It was first enacted under the Ford administration in 1975 and was built with the dual purpose of incentivizing the earning of income and reducing poverty. Its popularity and impact has led to bi-partisan political support and expansion a number of times since it was created, making it one of the largest social welfare programs in the United States today.
The Earned Income Tax Credit is a refundable tax credit, which means that it not only can be subtracted from taxes owed, but can be refunded to the taxpayer if taxes are not owed.
How Much is the Earned Income Credit?
The EITC can be worth as much as $6,431 for the 2018 tax year and $6,557 for the 2019 tax year. However, the credit amount varies significantly depending on tax filing status, number of qualifying children, and income earned. It is phased in and then phased out at certain income thresholds.
Earned Income Tax Credit Qualifications
There are a number of qualifications that must be met in order for a taxpayer to be eligible for the Earned Income Tax Credit.
1. You must first have taxable “earned income”. Taxable earned income includes any of the following:
- Wages, salaries, tips, and other taxable employee pay
- Union strike benefits
- Long-term disability benefits received prior to minimum retirement age
- Net earnings from self-employment if:
- You own or operate a business or a farm or
- You are a minister or member of a religious order (special rules apply)
- You are a statutory employee and have income. (statutory employees are contractors and will have a box on their W2 designating them as ‘statutory’)
Taxable earned income does not include:
-
Pay received for work while an inmate in a penal institution
-
Interest and dividends
-
Retirement income
-
Social security
-
Unemployment benefits
-
Alimony
-
Child support
2. You, your spouse, and any qualifying child must have an eligible Social Security # that is valid for employment.
3. You can be any filing status except “married filing separately”.
4. You have qualified children, OR
- You (and your spouse if you file a joint return) meet all the EITC basic rules AND
- You (and your spouse if you file a joint return) cannot be claimed as a dependent or qualifying child on anyone else’s return, AND
- You (or your spouse if you file a joint return) are between 25 and 65 years old at the end of the tax year, usually Dec. 31.
5. Your income falls within the eligible income range (highlighted below).
6. Your tax year investment income must be $3,500 (2018) or $3,600 (2019), or less, for the year.
7. Must not file Form 2555, Foreign Earned Income or Form 2555-EZ, Foreign Earned Income Exclusion. In other words, you must have lived in the U.S. for more than half of the year.
Earned Income Credit Qualifying Children
While it is possible to qualify for the Earned Income Credit without children, the amount of the credit increases with each qualified child. Qualified children must meet each of the eligibility tests:
Relationship Test:
- Your son, daughter, adopted child, stepchild, foster child or a descendant of any of them such as your grandchild
- Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephew
Age Test:
- At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) and younger than 19
- At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) younger than 24 and a full-time student
- At the end of the filing year, your child was any age and permanently and totally disabled
Residency Test:
Child must live with you (or your spouse if you file a joint return) in the United States for more than half of the year
Joint Return:
The child cannot file a joint return for the tax year unless the child and the child’s spouse did not have a separate filing requirement and filed the joint return only to claim a refund.
Tiebreaker Rules:
Note that only one person can claim a specific qualified child (i.e. in cases of divorce). There are special “tiebreaker rules“.
Earned Income Credit Table for 2018 Income Limits & Maximum Amounts
In addition to the aforementioned qualifications, you must have earned income and adjusted gross income (the greater of which is used) within certain income limits in order to qualify for the earned income credit.
Here is the Earned Income Tax Credit table for the 2018 tax year:
| Filing Status | No Qualifying Children | 1 Qualifying Child | 2 Qualifying Children | 3+ Qualifying Children |
|---|---|---|---|---|
| Single, Head of Household, Widow(er) Threshold Phaseout: | $8,490 | $18,660 | $18,660 | $18,660 |
| Single, Head of Household, Widow(er) Completed Phaseout: | $15,270 | $40,320 | $45,802 | $49,194 |
| Married Filing Jointly Threshold Phaseout: | $14,170 | $24,350 | $24,350 | $24,350 |
| Married Filing Jointly Completed Phaseout: | $20,950 | $46,010 | $51,492 | $54,884 |
The EITC maximum credit amounts for 2018 are:
- $6,431 with three or more qualifying children
- $5,716 with two qualifying children
- $3,461 with one qualifying child
- $519 with no qualifying children
Earned Income Credit Table for 2019 Income Limits & Maximum Amounts
And here is the Earned Income Tax Credit table for the 2019 tax year:
| Filing Status | No Qualifying Children | 1 Qualifying Child | 2 Qualifying Children | 3+ Qualifying Children |
|---|---|---|---|---|
| Single, Head of Household, Widow(er) Threshold Phaseout Amount: | $8,650 | $19,030 | $19,030 | $19,030 |
| Single, Head of Household, Widow(er) Completed Phaseout Amount: | $15,570 | $41,094 | $46,703 | $50,162 |
| Married Filing Jointly Threshold Phaseout Amount: | $14,450 | $24,820 | $24,820 | $24,820 |
| Married Filing Jointly Completed Phaseout Amount: | $21,370 | $46,884 | $52,493 | $55,592 |
The EITC maximum credit amounts for 2019 are:
- $6,557 with three or more qualifying children
- $5,828 with two qualifying children
- $3,526 with one qualifying child
- $529 with no qualifying children
Can you claim both the EITC and Child Tax Credit in the Same Year?
Although I have not personally done this, it is my understanding that you can claim both the Earned Income Credit and Child Tax Credit within the same year if you meet all of the qualifications for each. In other words, they are not mutually exclusive credits.
Earned Income Credit Calculator
The Earned Income Credit is automatically calculated in IRS form 1040, however, there are some alternatives if you’d like to play with the numbers.
As noted before, the EITC is one of the most complicated tax credits in the entire tax code, with a whole host of qualifying criteria. If you’d like to use a calculator to determine the amount of credit you might be eligible for, there are a few EITC calculator options:
- IRS EITC assistant: the most comprehensive – the EITC goes through all of the qualifying criteria to first determine eligibility (make sure you select the appropriate tax year).
- Bankrate EITC calculator: gives you a quick and dirty number, not taking into account eligibility.
How Do I Claim the Earned Income Credit?
As noted earlier, the earned income credit is calculated through filling out your basic 1040 form.
Any of my following picks for the best tax software can help you accurately claim the earned income tax credit through the software questionnaire and resulting paperwork:
- H&R Block (25% off at that link)
- Turbotax (up to $20 off paid online versions at that link – ends 2/18/19)
- TaxAct: 20% off at link
- Taxslayer: 20% off at link, with code “Offer20”
It’s also worth noting that even if your income level falls below the standard minimum income to file taxes thresholds, you need to file a tax return in order to be able to claim the Earned Income Tax Credit. So don’t miss out by not filing!
For More Information on the Earned Income Credit
There are even more special rules and qualifications that what I’ve highlighted here, so you’ll need to do your due diligence. For more information, visit the IRS EITC topic and EITC Central.
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Thank you for de-mystifying EITC! This is something I have always wanted to become familiar with and your post is of great help.
That’s why I wrote it. I had always heard a lot about the EITC, but didn’t know the inner workings. Glad to hear it was helpful.
How can your child be younger than you? See age test
How can people live income less than 55k and have 3 Kids?
Remember, not everyone with three kids planed to be down on their luck. Jobs vaporize, marriages end, people die, some grandparents are raising kids. Do you think minimum wage earners ($7.25 in my area) or even those getting twice minimum wage, get $55K annually? Do the math. $14.50 hourly x 40 hours per week x 52 weeks per year = $30,160 annualy.
How it is done: For starters, live in an area with a lower cost of living. Then rely on lots of public assistance. LIHEAP Heating assistance, food pantries, free, used clothing/coat giveaways, SNAP, WIC, Commodities for seniors, community meals, less than trustworthy child care. Scholarships for any activities the children want to participate in. Going without things like cell phones, and cable TV.
Society pays one way or another. Give people self-respect by respecting them enough to pay a living wage for a fair days work. http://livingwage.mit.edu
I’d like to point out that earning over 20K/yr, pretty much disqualifies one from most forms of public assistance other than perhaps children’s Medicaid and LIHEAP. I’ve raised my two son’s (now 25 & 17) for the most part on my own after my divorce, My income is up to $40K now. I spend many of those years in the $20-30K range. This income range qualified my children for only Medicaid/Healthy kids, with 2 exceptions when my income was at its lowest: there were 2 winters that I qualified for $300 for heating fuel and almost a yr of infant/child care ($80/wk), which I lost when I received a $20/wk raise.
You ask, how do you live off less than $40K with two kids?? You learn to budget and shop wisely. You don’t live in a large house with lots of stuff. You live in an apt or mobile home. You buy used cars and furniture. You use coupons whenever possible. You don’t use credit cards, you put a little bit at a time in a savings account then pay yourself back with interest when you “borrow” from it.
You spend an entire year stashing every $5 bill received as change from $10’s and $20’s in a little pickle jar so when December arrives there’s money for Xmas gifts. Which, by the way, is pretty much the only time of year, other than birthdays that money is spent on “Wants” instead of “Needs”.
Most importantly, you teach your children that “things” are not “given”, they are “earned”.
Kudos to you Wendy! You survived and thrived! If no one ever told you “Good job,” I’m telling you know as a divorced woman with three children who has sung the same song.
I HAVE SO MUCH RESPECT FOR SINGLE MOMS AND DADS. THE “WANTS” vs THE “NEEDS” IS SOMETHING I’VE TRIED TO GET MY SPOUSE TO WEIGH IN WHEN BUYING. I’M A BUDGET WOMAN WHICH MAKES IT HARD IF SOMEONE IS DOING YHE :WANTS.” SO, YOUR DEFINITELY DOING GREAT AND TEACHING YOUR KIDS CORRECTLY. GREAT JOB!!!
Well said. Hats off to you women.
Well said!
Smart people can survive .
Very poorly
I worked full time and never made it over 12,000, usually 10,000 and we have three children. We have what we need but its tough at times. Unfortunately I don’t think a lot of people understand how hard it is to get out of poverty. Unfortunately I am accumatulating a lot of student debt trying….
It’s difficult to maintain a reasonable budget for a family making these wages. However, it depends where you live (cost of living). Our family consists of my husband, myself and our 3 children… plus a dog, and we fall into this bracket. We own our own home, have 2 cars and do not use public assistance, and we make it work. You’ve got to be very conscientious of what you spend. It can be exhausting, but it works.
Alex, it is possible. I live in Washington, have a job and three kids ,and we don’t live on welfare. My take home a year is around $50k. We just live under our means and have a budget every month. I also contribute to my 401k and HSA. I know all that sounds crazy, but it is possible.
$55K is decent money in many parts of the U.S. especially down South. There are hundreds of thousands of people who live on $55K (or less) with 3 (or more) kids. Like many have said, watch the spending and don’t buy a bunch of “wants”. Stick to the needs.
is this also allocated in india?
I raised a son without welfare and on my own while making around $20k a year. Some years were far less, some a bit more, but I can tell you that we only qualified for medical assistance for my son. We lived in rundown mobile homes and food was scarce most times, but I made too much to qualify for even food stamps.
Thank you Anna for NEVER GIVING UP! We do what we have to to raise our children, keep a roof over their heads, food in their tummies, and shoes on their feet (not Nike’s or Brooks – we can’t afford them).
I raised 6 children on less that $15,000 a year. With no child support to speak of and not regular at that. We lived close to my family owned farm and was allowed to make a garden there. We canned a LOT in the summer and cut wood for our wood heater in the winter. We may have lived in a rundown house but my kids were never hungry or cold. They wore garage sale clothes/shoes and did without a lot of “extras”. The one thing that we had an abundance of was LOVE. I have seen my kids MAKE birthday presents for each other so they would have a lot to open! It is not about driving new cars, living with a house full of stuff but the LOVE that is shared between those 4 walls that count!
What’s sad is that I qualified for Earned Income Credit every year I served in the military. Let that sink in. And we didn’t have on post housing either. Because the lowest ranked people have the longest waiting list to get on post.
1,500.00 a year. A year! Divorced mom with one child.
I didn’t see any tax credit for senior citizen, not working and not on social security income yet, as a single dependent, who could claim him in the family and what amount he is eligible for. that’s my situation, any one out there can help me plz god bless you with happiness and shower him kindness on you your family and all the world
thank you
Thanks for the explanation. I do not get this phaseout stuff. There are two charts. How do I know if I am eligible?
I raised 8 kids with an income between 30,000 and 35,000 it was not easy but I did alot of bartering and trading to make it
G O A T. 🗽
This explains the EIC perfectly. And I’ve had years of dealing with it. It’s only downfall or needed change I see to it is in the initial qualifier section. Hundreds of thousands of grandchildren are being raised by grandparents today. My husband and I are raising 3. My husband had retired and has a pension plan from the state because he worked for the state for 33 years in law enforcement with numerous advancements.
Because he received retirement and regardless of the fact that he had to go back to work full time no earned income. And that fact seems very wrong when many receiving welfare and food stamps will all qualify for the EIC as long as they work about 15 hours a week.
Beyond that fact, it’s a great social program for all the people that think socialism is the equal to communism. It isn’t as long as it’s demicratically decided by the people.
I believe age limit should read under 65 years old at end of year!
You can’t be 65 yrs old at end of year to qualify.
“BETWEEN 25 and 65 years old at the end of the tax year” is the same thing (older than 25, younger than 65), it does not say “you can be 65”.
SINGLE PARENT OF 3 LIVING ON $30K A YEAR. YOU DO WHAT YOU HAVE TO TO TAKE CARE OF YOUR FAMILY.