Earned Income Tax Credit

What is Earned Income?

Earned income includes all the taxable income and wages you get from working.

There are two ways to get earned income:

You work for someone who pays you
or
You work in a business you own or run

Taxable earned income includes:

  • Wages, salaries, tips, and other taxable employee pay;
  • Union strike benefits;
  • Long-term disability benefits received prior to minimum retirement age;
  • Net earnings from self-employment if
  • Gross income received as a statutory employee.

Nontaxable Combat Pay election. You can elect to have your nontaxable combat pay included in earned income for EITC. The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. Electing to include nontaxable combat pay in earned income may increase or decrease your EITC. See Publication 3. Armed Forces Tax Guide, for more information.

Examples of Income that is Not Earned Income:

  • Pay received for work while an inmate in a penal institution
  • Interest and dividends
  • Retirement Income
  • Social security
  • Unemployment benefits,
  • Alimony
  • Child support.

Earned Income Tax Credit Rules for Everyone

To qualify for Earned Income Tax Credit or EITC, you and your spouse if married and filing a joint return, must meet all of the following rules:

  1. Have a valid Social Security Number
  2. Have earned income from employment, self-employment or another source
  3. Cannot use the married, filing separate filing status
  4. Must be a U.S. citizen or resident alien all year or a nonresident alien married to a U.S. citizen or resident alien and choose to file a joint return and be treated as a resident alien
  5. Cannot be the qualifying child of another person*
  6. Cannot file Form 2555 or 2555-EZ (related to foreign earned income)
  7. Your Adjusted Gross Income and earned income must meet the limits shown on the Income Limits, Maximum Credit Amounts and Tax Law Updates Page
  8. Your investment income must meet or be less than the amount listed on the Income Limits, Maximum Credit Amounts and Tax Law Updates Page

After you meet the EITC rules for everyone, you must also meet the rules for either workers without a qualifying child or have a child that meets the qualifying child rules.

There are special EITC rules for members of the military, ministers, members of the clergy, those receiving disability benefits and those impacted by disasters. Find out more about the special EITC rules.

Qualifying Child Rules

Return to EITC Home Page

Your child must have a valid Social Security Number and must pass all of the following tests to be your qualifying child for EITC:

  • Relationship
    • Your son, daughter, adopted child1, stepchild, foster child2 or a descendent of any of them such as your grandchild
    • Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephew
  • Age
    • At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) and
      • younger than 19, or
      • younger than 24 and a full-time student
    • At the end of the filing year, your child was any age and permanently and totally disabled3
  • Residency
    • Child must live with you (or your spouse if you file a joint return) in the United States4 for more than half of the year.
  • Joint Return
    • The child cannot file a joint return for the year, unless the child and the child’s spouse did not have a filing requirement and filed only to claim a refund.

Note: A qualifying child cannot be used by more than one person. 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. Read more about Qualifying Child of More Than One Person here.

 


1Adopted Child. An adopted child is always treated as your own child. It also includes a child lawfully placed with you for adoption.

2Foster Child.  For EITC, a child is your foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. (An authorized placement agency includes a state or local government agency or an Indian tribal government. It also includes a tax-exempt organization licensed by a state or an Indian tribal government.)

3Permanently and totally disabled.  Your child is permanently and totally disabled if both of the following apply:  1). The child cannot engage in any substantial gainful activity because of a physical or mental condition and 2). A doctor determines the condition has lasted or can be expected to last at least a year or lead to death.

4United States. This means the 50 states and the District of Columbia. It does not include Puerto Rico or U.S. possessions such as Guam.

Refer to 596, Earned Income Credit or Publication 596 (SP)  Credito por Ingreso del Trabajo for information on the following:

  • Definition of School and Student
  • Residency Test and Homeless Shelters
  • Residency Test and Military Personnel
  • Birth or Death of a Child
  • Temporary Absences
  • Kidnapped Child

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