If you file a tax return, even if you do not owe any federal income taxes, you can potentially receive an earned income tax credit. This credit is available for people below a certain income level who are between the ages of 25 and 64, who have earned some income, who are not a dependent or qualifying child of someone else, and who spend at least half of the year in the U.S.
You will need to file Form 1040, Form 1040A, or Form 1040EZ to get the earned income tax credit. People who have qualifying children also must submit a form known as Schedule EIC. This will contain the names, ages, Social Security numbers, and other personal information of the children. You can retain a professional tax preparer to help you file the return and claim the credit. While you may need to pay this professional, they often will take their fee from the tax credit that you ultimately receive. In many cases, people who are eligible for the earned income tax credit can get free assistance with preparing their taxes from the IRS Volunteer Income Tax Assistance program.
Income Limits for the Earned Income Tax Credit
The limits depend on how many qualifying children you have, as well as whether you are filing individually or jointly with a spouse. Separate limits apply to taxpayers with no qualifying children, with one qualifying child, with two qualifying children, and with three or more qualifying children. The IRS changes each set of limits each year. As of 2019, the limit is $15,570 for taxpayers with no children ($21,370 for spouses filing jointly), $41,094 for taxpayers with one child ($46,884 for spouses filing jointly), $46,703 for taxpayers with two children ($52,493 for spouses filing jointly), and $50,162 for taxpayers with three or more children ($55,952 for spouses filing jointly). A qualifying child can be any biological child, adopted child, stepchild, or foster child. This definition also can include a grandchild, a sibling, a half-sibling, a stepsibling, a niece or nephew, or any other descendant of a biological child, adopted child, stepchild, or foster child. The qualifying child must be no older than 18, or no older than 23 if they are a full-time student. They must spend at least half of the year living with you.
Income for the purposes of this credit includes not only income earned form a job but also unemployment benefits, taxable Social Security benefits, investment income, retirement benefits, and any alimony from an ex-spouse. It does not include most forms of public benefits, such as Medicaid, Supplemental Security Income, or food stamps. You will not qualify for the earned income tax credit if you earn more than $3,200 from investments.
Calculating Your Earned Income Tax Credit
Similar to income limits, the size of the credit depends on whether you have no, one, two, or three or more qualifying children. As of 2019, people with no children can receive up to $529, people with one child can receive up to $3,526, people with two children can receive up to $5,828, and people with three or more children can receive up to $6,557. A taxpayer who does not owe any taxes will receive the full amount of the applicable credit. If a taxpayer owes some taxes, they will receive the amount of the credit that remains after taking their tax obligation into account. You also may be able to have your employer prepay your credit through your paychecks in a process known as negative withholding.
If you are unsure whether you qualify for the earned income tax credit, you may want to look up the current eligibility requirements online. You can also review the worksheet attached to Form 1040, Form 1040A, or Form 1040EZ to get a better sense of whether you are eligible and how much you may receive.