The Earned Income Tax Credit is a refundable tax credit. That means, even if your tax liability is zero, if you qualify for the EITC, the credit will be paid to you. It was created to benefit low-income, working families. However, the criteria for claiming the credit can be confusing.
It’s estimated only 4 of 5 families who qualify for EITC actually claim the credit.
You may qualify for EITC if:
- Your earned income and adjusted gross income are within certain limits.
- You meet the basic rules (SSN, filing status, income requirements)
- You either:
- Meet the rules for those without a qualifying child (cannot be claimed as a dependent or QC on anyone else’s return, AND are between 25-65 years old)
- Have a child that meets all the qualifying child rules for you, or your spouse, if you file a joint return (SSN, relationship, age, residency, joint return).
Below is an explanation of the criteria for claiming the EITC, broken down into smaller pieces to make it a bit easier to understand.
INCOME
Earned income is, generally, money either paid to you by an employer or money you earn by operating your own business or farm. Earned income includes: wages, tips, salaries, union strike benefits and certain long-term disability benefits.
The following is NOT earned income: retirement income, social security, unemployment benefits, alimony and child support. You must have at least $1 in earned income in order to claim the EITC.
You must have less than $3,400 in investment income. You must not file any foreign earned income exclusion form.
Both your earned income and adjusted gross income must be no more than:
| Filing Status | Qualifying Children Claimed | |||
| Zero | One | Two | Three or more | |
| Single or Widowed | $14,820 | $39,131 | $44,454 | $47,747 |
| Married Filing Jointly | $20,330 | $44,651 | $49,974 | $53,267 |
FILING STATUS
A taxpayer using married filing separately may not claim the EITC.
Example: Robert and Rachel separated in 2015. Rachel has primary custody of their two children. Their divorce is not final. They could file a joint return, despite their separation, but Rachel is concerned about how truthful Robert is with his finances and does not want to have to confront him to file the return. So she files a return using the married filing separately status. As a result, she cannot claim the EITC.
Any other filing status is fine. (Married Filing Jointly, Single, Head of Household, Qualifying Widow(er))
RESIDENCY
The taxpayer and qualifying child must live in the same home for more than half of the year. That means more than six months or 183+ days. That residence must be in the 50 U.S. states and the District of Columbia. The taxpayer claiming the EITC only has to be resident of the U.S. if they are not a U.S. citizen (i.e., they must be a resident alien).
Example: Paul lives at home from January until May, at which point he graduates high school and moves into an apartment of his own. Despite that, his parents still provide him financial assistance because he is unemployed. Since Paul only lived with his parents for five months of the year, he will not meet the residency test.
Example: Mark and Lauren give birth to their son in Kansas City in January. In April, they move to Canada for a job opportunity. They cannot claim the EITC because they did not maintain a U.S. residence for more than six months.
CITIZENSHIP & SOCIAL SECURITY NUMBERS
The qualifying child must be a U.S. citizen, national or resident. Again, the taxpayer claiming the EITC must also be a U.S. citizen or resident alien for the tax year. The child, taxpayer and all individuals for which the EITC is based upon on the tax return must have valid SSNs.
Example: Maria and Felix are U.S. citizens. They claim their daughter, Penelope (also a citizen), 6, as a dependent and also claim Maria’s mother, Guadalupe, as a dependent by using an ITIN. Guadalupe lives in a nursing home in Mexico. Can the couple claim the EITC with Penelope as their qualifying child? Yes, as Penelope is a U.S. citizen with a valid SSN. They cannot use Guadalupe in determining the credit as she is not a resident alien and lacks a SSN. Guadalupe will also fail the age test discussed below.
Example: Paul and Lauren are in the process of adopting a child, Lilly. She has been placed with the couple but the adoption is not yet final. They have not been able to get Lilly’s social security number, so they will file a tax return for her using an ATIN (Adoption Tax Identification Number). They cannot claim Lilly as a qualifying child for the EITC. If Lilly later gets an SSN, the couple can amend returns for open tax years to claim the EITC if the other requirements are met.
Example: Kai and Zehra are studying in the U.S. on student visas. They also have two children in the U.S. with them. They all use ITINs (Individual Taxpayer Identification Numbers) to file a tax return. They cannot claim the EITC.
AGE
The individual claimed must be younger than the taxpayer in all cases. For example, you cannot claim a dependent grandparent for purposes of the EITC. Additionally, a qualifying child must either be: under 19, under 24 and a full-time student or any age and totally/permanently disabled.
Nina, 45, cares for her mother, Linda, 60, who has Alzheimer’s. Though Nina can claim Linda as a dependent for exemption purposes, she cannot claim her when determining her EITC.
Shelly, 18, can claim her daughter, Stella, 2, for the EITC.
Mark, 50, can claim his daughter, Lauren, 21, for the EITC. Lauren is enrolled in college full-time.
Pam, 55, wants to claim her son, Patrick, 23, for the EITC because he lives at home. Because he is not attending school full-time, she cannot claim him.
RELATIONSHIP
The child must be the taxpayer’s son, daughter, stepson, stepdaughter, eligible foster child, adopted child, or brother, sister, half-sibling, stepsibling, or descendant of any of these individuals. Someone who only meets the “qualifying relative” test is never eligible to be claimed for purposes of the EITC.
Mother claims son – yes!
Older brother claims younger step-sister – yes!
Grandfather claims grandson – yes!
A man lives with his girlfriend and her child. He is not the child’s father. He cannot claim the child for the EITC, even if all other tests are met.
DEPENDENTS CLAIMING DEPENDENTS
A taxpayer who is the dependent of another taxpayer may still claim a child for the EITC. However, a taxpayer who is a qualifying child of another taxpayer for EITC purposes (regardless of whether the taxpayer is also a dependent), may not claim the EITC for his or her own child.
However, a married child is only a qualifying child for EITC purposes if the taxpayer may claim a dependency exemption for him or her (i.e. the child passes the joint return test).
Example: Donna is a qualifying child on her mother Abby’s return. Abby claims Donna as a dependent for the dependency exemption purposes. Donna can claim Abby’s son, Jed, for the EITC on her own return if he meets the other qualifying child requirements and as long as Abby does not claim Jed for the EITC.
Other qualifications:
Your qualifying child may not be used by more than one person to claim EITC. Sometimes a child meets the tests to be a qualifying child of more than one person. However, only one of those people can actually treat the child as a qualifying child. You cannot divide the tax benefits of one child.
If a child qualifies for more than one person and one of the persons is a parent or parents, the non-parent can claim the child only if their AGI is higher than the parent(s). If the child qualifies another relative and the parent AGI rules do not apply, the taxpayers choose. If more than one person claims the same child, IRS applies the tiebreaker rules.
