Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is designed to help people with low income by lowering the amount of federal income tax they owe. Even if you don’t earn enough money to owe federal income taxes, you may be able to get an EITC.

Eligibility

To qualify, you must have income from employment, self-employment, or employer-paid disability benefits that is below certain limits and you must file your federal taxes.

The amount you get from your EITC depends on your Adjusted Gross Income (AGI), whether you are married, and the number of children you have. For 2018 (filing taxes by April 2019), the EITC ranges from $519 to $6,431.

EITC Adjusted Gross Income (AGI) Limits and Maximum Credits*

No Children

1 Qualifying Child

2 Qualifying Children

3 or More Qualifying Children

Single

AGI limit: $15,270
Max credit: $519
AGI limit: $40,320
Max credit: $3,461
AGI limit: $45,802
Max credit: $5,716
AGI limit: $49,194
Max credit: $6,431

Married (filing jointly)

AGI limit: $20,950
Max credit: $519
AGI limit: $46,010
Max credit: $3,461
AGI limit: $51,492
Max credit: $5,716
AGI limit: $54,884
Max credit: $6,431
* Figures are for tax year 2018 (filing by April 2019).
To be eligible for the Earned Income Tax Credit (EITC) you must meet several requirements:

General requirements:

  • You must meet adjusted gross income requirements (see table above)
  • You must have earned income from employment, self-employment, or employer-paid disability benefits that you got before retirement
  • You must have a Social Security Number valid for employment
  • You cannot file your taxes as “married filing separately.” If you’re married, you must file a joint tax return
  • You must be a U.S. citizen or resident alien. If not, you must be married to a U.S. citizen or resident alien and filing a joint tax return
  • You must live in the U.S. for more than half of the year

Age Requirements:

  • If you are claiming qualifying children, you can be any age
  • If you’re not claiming a qualifying child, you must be 25-64 years of age

Additional requirements:

  • You cannot claim foreign income or a foreign housing deduction using Form 2555 or 2555EZ
  • You must not have investment income that exceeds $3,500 (for 2018)
  • You cannot be the dependent of another person
  • You cannot be the qualifying child of another person

Earned Income

To qualify for an EITC, you must have earned income. This can include your wages, salaries, tips, net earnings from self-employment, or any other form of taxable pay. You can also elect to include nontaxable combat pay as earned income.

The EITC program considers employer-paid disability payments that you get before retirement earned income. But benefits payments from a policy you paid the premiums for, or that you got after retirement, would not be considered earned income.

Other things that do not qualify as earned income under the EITC include:

  • Interest and dividends
  • Social Security and railroad retirement benefits
  • Pensions and annuities
  • Alimony and child support
  • Workers’ compensation benefits
  • Unemployment compensation
  • Welfare benefits
  • Veterans benefits

If you are married and filing jointly, at least one spouse must have earned income to be eligible for an EITC.

Adjusted Gross Income and Qualifying Children

In addition to the earned income requirement, you must have an adjusted gross income (AGI) below certain levels to qualify for an EITC.

Your adjusted gross income (AGI) includes all earned income before deductions for taxes, health care or other expenses, minus certain business, education-related, and other expenses. While filling out your annual tax return (IRS Form 1040), you will be asked a series of questions that will let you figure out what your AGI is.

Example:

John earned $30,000 in wages for the year before taxes and other deductions were taken out of his paychecks. He also earned $4,000 in employer-paid disability insurance payments for the year. He had no deductions for business, education-related, or other expenses.

According to the EITC program, John’s adjusted gross income would be $34,000 — his gross wages plus payments he got from the employer-paid disability insurance.

For a child to be considered a qualifying child under EITC, several requirements must be met:

  • Relationship: If you are claiming one or more child, they must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these (for example, your grandchild, niece, or nephew)
  • Residence: The child must live at the same residence as you for more than half the year and have a valid Social Security number
  • Age: At the end of the tax year, the child must be under 19. Or, if going to school full-time, the child must be under 24. The only exception is for people who are permanently and totally disabled. If your child is permanently and totally disabled, there is no age requirement

According to the IRS, a person is considered “permanently and totally disabled” if their condition is expected to last continuously for at least one year or is expected to result in death, and if they cannot perform any Substantial Gainful Activity (SGA). For 2018, this means they have to be unable to earn more than $1,220 per month ($2,040 if they are blind).

Note: Qualifying children can only be used by one family member to claim an EITC.

How to Get an EITC

If you qualify, you will claim your Earned Income Tax Credit when you file your federal tax return. To calculate the value of your EITC, you can use the Earned Income Credit Worksheet in your IRS Form 1040 instruction booklet. If you have a qualifying child, be sure to attach a Schedule EIC. You can ask the IRS to calculate your tax credit for you by noting an “EIC” on the Earned Income Credit line on your tax return.

To see if you qualify for an EITC, and how much it might be, use the IRS EITC Assistant.

Tax Preparation Tips for Claiming the EITC

Keep all your W-2's and keep a record of who you have worked for during the year. This will make things simpler when it comes time to file your taxes.

If you are on a limited income, do not pay someone to do your taxes. Use a Volunteer Income Tax Assistance (VITA) Center to file. Most centers can e-file your return for free. If you are self-employed, have all your receipts and a log of expenses ready for the tax preparer. To find a local VITA Center, check 2-1-1 Arizona or the IRS VITA Site List for Arizona.

Be sure to file your taxes, even if your income is lower than the amount at which you are legally required to file. You might be eligible for an EITC or some other tax credit that you can’t get without filing. Many families with children who qualify for an EITC may also be eligible for a Child Tax Credit (CTC).

The following is a summary of the EITC requirements:

Earned Income Credit Requirements for Tax Year 2018 (filing by April 2019)

Requirements

Single Person without Qualifying Child

Single Person with at least one Qualifying Child

Adjusted Gross Income

$15,270 for a single person

$20,950 for married couple

One qualifying child:

$40,320 for a single person

$46,010 for married couple

Two qualifying children:

$45,802 for a single person

$51,492 for married couple

Three or more qualifying children:

$49,194 for single individual

$54,884 for married couple

Social Security Number

Social Security Number valid for employment

Social Security Number valid for employment

Tax Status

Joint tax return if married, unless separated for more than six months

Joint tax return if married, unless separated for more than six months

Citizenship

Must be a U.S. citizen or legal resident. Or if you’re a nonresident alien, you must be married to a U.S. citizen or legal resident and filing a joint tax return

Must be a U.S. citizen or legal resident. Or if you’re a nonresident alien, you must be married to a U.S. citizen or legal resident and filing a joint tax return

Foreign Income

Cannot claim foreign income or a foreign housing deduction using Form 2555 or Form 2555-EZ

Cannot claim foreign income or a foreign housing deduction using Form 2555 or Form 2555-EZ

Investment Income

Cannot have investment income that exceeds $3,500

Cannot have investment income that exceeds $3,500

Earned Income

Must have earned income

Must have earned income

Relationship

Does not apply

The child must be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendent of any of these (for example, grandchild, niece, or nephew)

Age

Adult:

Must be at least 25 years old at the end of the tax year, and

Must be under age 65 at the end of the tax year

Adult:

No age requirements

Children:

Under age 19 at end of the year

Under age 24 at the end of the year and a full-time student, or

Any age if permanently and totally disabled

Residency

Must live in the U.S. for more than half of the year

Must live in the U.S. for more than half of the year

Qualifying Child

Cannot be the qualifying child of another person

Must have at least one qualifying child

Each qualifying child can only be used by one family member

Dependent Child

Cannot be the dependent of another person

Cannot be the dependent of another person

Tax Forms

1040

To have IRS figure the amount of your credit, enter “EIC” on the Earned Income Credit line of your tax form

1040

AND

Schedule EIC

To have IRS figure the amount of your credit, enter “EIC” on the Earned Income Credit line of your tax form

Interaction with Other Disability Benefits Programs

Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI)

You must have some form of earned income to qualify for an EITC. Social Security benefits do not count as earned income under the program. You can, however, be on SSI or SSDI and claim an EITC, as long as you have some form of earned income.

If you're on SSI, you should spend any money you receive from an EITC within 12 months. If you save the money longer than that, Social Security will count that money toward SSI's resource limit.

Individual Development Accounts (IDAs)

Money from an EITC can be put into an Individual Development Account. This lets you get matching funds from the IDA program sponsor.

Plans to Achieve Self-Support (PASS)

Money from an EITC can be set aside in a PASS. This will let you reach your employment goals more quickly, by saving money without affecting the way your income is counted.

Long-Term Disability Insurance

Employer-paid long-term disability insurance benefits that you got before retirement count as earned income under EITC and can therefore be used to qualify for the program. Disability insurance benefits which you pay the premiums for, or that you get after retirement, are not considered earned income and can’t be used to qualify for an EITC.

Child Tax Credit (CTC)

The Child Tax Credit (CTC) is available to parents with children under age 17. The CTC gives these parents up to a $2,000 tax credit for each child in the family under 17. Eligible families must be working and earning at least $2,500 a year.

Note that if you're on SSI and receive money from a CTC, you should spend it within 12 months. After 12 months, Social Security will count that money toward SSI's resource limit. If you have any questions about this, contact the Ability360. You can find the local information for ABIL on their website.

Other Programs

If you or your spouse is a U.S. citizen who received taxable disability income and was permanently and totally disabled during this tax year, you may be eligible for the Credit for the Elderly or the Disabled.

A guide to other employment supports for people on SSI is available here. You can also contact the Ability360 with questions. You can find the local information for ABIL on their website.

Volunteer Income Tax Assistance Program (VITA)

The IRS Volunteer Income Tax Assistance program (VITA) offers free tax help for taxpayers who qualify.

The VITA program offers free tax help to low- to-moderate income (generally $49,000 and below) people who can’t prepare their own tax returns. Certified volunteers are available to help prepare your taxes and they will make sure you get special credits, such as Earned Income Tax Credit, Child Tax Credit, and Credit for the Elderly or the Disabled. In addition to free tax return preparation assistance, most sites also offer free electronic filing (e-filing).

VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations. To find a local VITA Center, check 2-1-1 Arizona or the IRS VITA Site List for Arizona.