Earned Income Tax Credit Requirements

 

Editor’s Note: Learn more about the Earned Income Credit requirements – like how to qualify to receive this tax credit.

Looking for updates about how the latest stimulus relief affects the Earned Income Credit? Check out our Coronavirus tax resource center for details. 

The Earned Income Tax Credit (EITC or EIC) 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.

Earned Income Credit qualifications

It’s estimated that only four out of five families who qualify for EITC claim the credit.

EITC requirements

Here are EITC requirements:

  1. Your earned income and Adjusted Gross Income (AGI) are within certain limits – in 2021 your earned income must be less than $57,414 if you’re married filing jointly with three or more children. The levels vary based on filing status and number of children.
  2. You meet the basic rules (valid SSN, qualifying filing status, U.S. citizen or resident, and other income requirements)
  3. You either:
    • Meet the rules for those without a qualifying child (you cannot be claimed as a dependent or be a qualifying child of another person, you meet age requirements, and you lived in the U.S. more than half the year); or
    • 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, and joint return), your qualifying child can’t be used by more than one person to claim the EIC, and you aren’t the qualifying child of another person.

Below is an explanation of the criteria for claiming the EITC, broken down into smaller pieces to make it a bit easier to understand.

EITC income requirements

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, non-taxable combat pay, 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 $10,000 or less 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:

Children or Relatives ClaimedMaximum AGI
(filing as Single, Head of Household, Widowed or Married Filing Separately*)
Maximum AGI
(filing as Married Filing Jointly)
Zero$21,430$27,380
One$42,158$48,108
Two$47,915$53,865
Three$51,464$57,414

EITC filing status

In the past, a taxpayer using Married Filing Separately could not claim the EITC. Beginning in 2021, you must meet additional requirements to claim the EITC if you are separated from your spouse and do not file a joint return. This may apply if you lived apart from your spouse for the last six months of the year or are legally separated according to state law under a written separation agreement or a decree of separate maintenance and you didn’t live in the same household as your spouse at the end of the year.

Any other filing status is fine (Married Filing Jointly, Single, Head of Household, or Qualifying Widow(er)).

EITC residency requirements

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 must be a citizen or resident of the U.S. (i.e., they must not be a non-resident alien).

Examples:

  1. 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.
  2. 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.

Special rules apply to military personnel stationed outside the U.S., children who born or died during the year, and other circumstances including adoption.

EITC citizenship requirements

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 Social Security numbers.

Examples:

  1. Maria and Felix are U.S. citizens. They claim their daughter, Penelope (also a citizen), 6, as a dependent. Marie and Felix also claim a daughter from a previous marriage, Sofia, 12, who was living in Mexico but came to live with them. Sofia has an ITIN because she is in the process of becoming a citizen but is not yet a U.S. citizen. Can the couple claim the EITC with Penelope as their qualifying child? Yes, as Penelope is a U.S. citizen with a valid SSN. Can the couple claim the EITC with Sofia as their qualifying child? No, because Sofia does not have a valid SSN.
  2. 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 they think they can get an SSN for Lily by October 15 they should consider filing an extension and claiming the EITC when the SSN is available. Otherwise, they won’t be able to claim EITC for Lilly until next year’s tax return.
  3. 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 can’t claim the EITC.

EITC age requirements

The qualifying child claimed must be younger than the taxpayer (or the taxpayer’s spouse if filing jointly) or totally and permanently disabled. Additionally, the qualifying child must either be: under 19, under 24 and a full-time student or any age and totally/permanently disabled.

Examples:

  1. Shelly, 18, can claim her daughter, Stella, 2, for the EITC.
  2. Mark, 50, can claim his daughter, Lauren, 21, for the EITC. Lauren is enrolled in college full-time.
  3. 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. This is so even if Pam can claim Patrick as a dependent qualifying relative.

EITC relationship eligibility

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.

Examples:

  1. A mother claims son – yes!
  2. An older brother claims younger step-sister – yes!
  3. A grandfather claims grandson – yes!
  4. 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.

Earned Income Credit qualifications for claiming dependents

Now that we’ve reviewed age, relationship, citizenship, and residency eligibility for EITC, here’s more information about the Earned Income Credit qualifications for claiming dependents.

A taxpayer who is a qualifying child of another taxpayer for EITC purposes may not claim the EITC for his or her own child (regardless of whether the other taxpayer can or does claim the EITC).

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).

Examples:

  1. Donna is 22 years old and a full-time student. She has a part-time job and earns $5,000. She lives with her mother Abby and Donna’s one-year old son Jed. Donna is a qualifying child of Abby because she meets the age, relationship, residency, and joint return tests. Therefore, Donna may not claim Jed for the EITC. Abby may be able to claim both Donna and Jed for EITC and other tax benefits depending on her income and other requirements.
  2. Your qualifying child may not be used by more than one person to claim the EITC. Sometimes a child meets the tests to be a qualifying child of more than one person. However, only one of those people can treat the child as a qualifying child. You generally cannot divide the tax benefits of one child. There are exceptions for divorced and separated parents, but you still can’t divide EITC.
  3. 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 adjusted gross income (AGI) is higher than the parent(s) and the parent(s) agree. If the child is a qualifying child of other taxpayers (not parents) , the child is treated as a qualifying child only of the taxpayer with the highest AGI. If more than one person claims the same child, IRS applies the tiebreaker rules.

More help with the Earned Income Credit

For more information on claiming the Earned Income Credit, get help from H&R Block. Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to help you get back the most money possible.

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