The earned income credit (EITC or EIC) is a refundable tax credit for lower-income workers. The credit can decrease or get rid of the taxes you owe. Also, the EIC is a "refundable" credit. This means that if your credit is more than the taxes you owe, the IRS pays you money - rather than you paying them money at tax time.
Watch this short video for an introduction to the EIC:
To claim the EIC, you must pass these tests.
Rules for everybody:
*Earned income is salaries, wages, tips, professional fees, and other amounts received as pay for work you perform, including income from self-employment. Child support, TANF, and and other types of public benefits (such as SSI and SS disability benefits) are not earned income.
Rules if you have a qualifying child:
Relationship Test: Your child must be your son, daughter, adopted child, grandchild, stepchild, sibling or stepsibling (or their descendants), or a foster child placed in your home by an authorized placement agency. The child must live in your home for more than half of the year.
Age Test: Your child must be:
Residency Test: Your child must have lived with you in the United States for more than half of 2018. "In the United States" means in one of the 50 states or the District of Columbia. Your child must have a valid Social Security number.
Rules if you do not have a qualifying child:
The EIC varies based on your adjusted gross and the number of qualifying children. For tax year 2018, the maximum amounts of the EIC are:
Not sure how much EIC you are eligible for? Use the IRS's EITC Assistant. It's easy!
No, it is not true. You can and should claim the EIC. Only the parent who has "primary residence" of the children may claim them as qualifying children for EIC eligibility. This is true even if your ex-spouse pays child support and claims the children as dependents. Claiming the EIC under these conditions will lead to an audit of your tax return, which will give you the chance to prove your eligibility. Contact us for help with your audit.
Yes. Only the parent with whom the children live for more than one-half the year may claim the EIC for those children. Federal law prohibits parents from "taking turns" claiming the EIC unless the child actually changes residence each year. When a non-custodial parent claims the EIC (for household with children), he or she runs the risk of severe penalties as well as the certainty of having to pay back all EIC amounts improperly received. A custodial parent who assists in this violation of the tax code also risks exposure to IRS penalties.
The simplest way of approaching this is to ask, "With whom does the child live for more than half the year?" Only that person, if otherwise eligible, can claim the EIC for household with children.
Updated April 2019