The EITC, or Earned Income Tax Credit, can provide you with direct reductions in your federal income tax. Better yet, i the EITC exceeds the tax you owe, then it is refundable, meaning that you will actually get a cash refund for the amount that EITC exceeds your federal income tax.
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EITC was designed so that working taxpayers with lower income, and especially those with children, would not have to pay federal income tax, or could pay a reduced rate of income tax.
To qualify for the EITC, you must have earned income. This can come from a job, your own business, or certain other types of income. It cannot come from interest, dividends, pension income, social security, unemployment, alimony, or child support.
Tax trivia: Wages earned by inmates in prison (license plates, etc.) do not qualify as earned income for purposes of EITC.
Taxpayers claiming EITC must meet several other requirements, too:
- have a Social Security number
- does not file “married filing separately” status
- US citizen, resident alien, nonresident alien married to a US citizen or resident alien
- qualifying child does not belong to another person (see below).
- Adjusted gross income and investment income do not exceed a legal maximum.
- valid social security number
- child is your son, daughter, adopted child, stepchild, foster child, or any descendent thereof.
- the child is younger than 19, or, if a full-time student, younger than 24, or, if permanently and totally disabled, any age.
- child lived with you for more than half the year.
- child can’t file a joint return, unless the child and their spouse only filed to claim a tax refund.
- child won’t be used by another person for the EITC.
- you (and if you’re married-filing-jointly, your spouse) lived in the United States for more than half the tax year.
- you (orif you’re married-filing-jointly, your spouse) are at least 25 years old, but less than 65.
- you (or if you’re married-filing-jointly, your spouse) cannot qualify as a dependent of another person.