7/7/2023
Knowing the tax regulations helps you to take advantage of certain resources that you have not taken into account. One of them is the Earned Income Tax Credit, which can ease your tax burden when it is time to file your tax return. We will talk about it in more detail below.
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What is the Earned Income Tax Credit or EITC?
Simply put, the Earned Income Tax Credit (EITC) is a tax benefit that can reduce the amount of taxes you owe or give you money back when you file your return.
The U.S. government gives you the opportunity to claim this credit regardless of whether you have children or are married. The basic requirement is that you have a job that earns you money.
This benefit gives you the advantage of eliminating any federal taxes when you file your tax return. If the amount of the Earned Income Tax Credit is more than you owe, you will receive a refund. When you qualify for this tax help, you can even receive a refund even if you don't owe taxes.
Those who work in the USA or its territories (American Samoa, Guam, Northern Marina Islands, Puerto Rico or US Virgin Islands) can get the federal credit.
Apart from the above, there are 31 states (plus DC and PR) in the union that have their own guidelines regarding the EITC.
Who can benefit from the EITC?
If you want to get the Earned Income Tax Credit, you must meet 4 main conditions:
- Income. You must be working and earning a salary even if your schedule indicates that you are not working continuously. Income can come from tips, union strike pay, work-related disability, wages, military pay, or self-employment. Your income cannot exceed the amount shown below (table).
- SSN (Social Security Number). You must have a SSN when you intend to claim the EITC. You cannot claim this benefit from the federal government if you file with an ITIN. This does not apply if you live in California, Colorado, Maine, Maryland, New Mexico, Oregon, or Washington, where state regulations accept the Individual Taxpayer Number.
- Qualifying child. This can be your daughter, son, grandchild, stepchild, someone adopted or placed in the custody of the government. A younger sibling, half-sibling, step-sibling or their descendants also qualify. You can be any age if you are totally disabled, under age 19 or under age 24 (full-time student). It is essential that he/she lives with you at least half the year in the United States.
- Separate claim while married. In this case, you cannot claim the Earned Income Tax Credit. However, there are 2 exceptions for you to receive the EITC under this mode: You and your child have not cohabited with the other spouse for more than 6 months during the tax year or you and your partner have a separation arrangement, so you have not cohabited during the tax year.
How to claim the Earned Income Tax Credit?
To get this tax help, the first thing to do is to file a tax return. If you are including a son or daughter, you must also file Schedule EIC (Form 1040).
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If you go to a tax preparer, this investment can take a big chunk out of what you could receive as a refund.
The good news is that there are some free options. You can go to the GetYourRefund or VITA (Volunteer Income Tax Assistance) sites to have IRS-endorsed accountants help you get it right. You can also go to MyFreeTaxes to file your taxes if you are not self-employed.
How much can you get for the EITC?
The amount of the credit will depend on how much you earn annually, the size of your family and your marital status. For the 2023 return, this benefit ranges from $560 to $6,935. The amount of the credit increases with each child in your custody, and people who do not have children can also claim it.
The tax table for this year (April 2023), looks like this:
| Number of children | Maximum income unmarried
| Maximum income married
| EITC |
| 0 | $16,480.00 | $22,610.00 | $560.00 |
| 1 | $43,492.00 | $49,622.00 | $3,733.00 |
| 2 | $49,399.00 | $55,529.00 | $6,164.00 |
| 3 or more | $53,057.00 | $59,187.00 | $6,935.00 |
- Generally, the less you earn, the greater the benefit.
- Both your earned income and your adjusted gross income must be below the amounts shown in the chart.
- Earned income includes tips, wages and other taxable items from your employer. Adjusted gross income is what you receive after certain deductions.
Español: Qué es el Crédito Tributario por Ingreso del Trabajo (EITC)