At tax time, most of us have an identical purpose: decrease our legal responsibility, and possibly even get some a reimbursement within the course of. The Earned Earnings Tax Credit score, or EITC, is a tax incentive that may have the ability to assist.

Chances are you’ll be eligible for the EITC for those who earned a comparatively low earnings within the earlier tax 12 months — particularly you probably have youngsters. On this article, we’ll discover precisely the best way to qualify, how a lot credit score you may get, and the best way to declare it in your tax return. Then we’ll comply with up with some regularly requested questions concerning the Earned Earnings Tax Credit score.

What Is Earned Earnings Tax Credit score?

The Earned Earnings Tax Credit score (EITC) is a refundable tax credit score accessible for low- to moderate-income people and households — particularly these with youngsters. The EITC is claimed while you file your tax return. The utmost quantity accessible for 2022 taxes is $6,935, although the quantity of credit score you’ll obtain is determined by earnings, submitting standing, and what number of qualifying youngsters you’ve.

The EITC is a credit score, not a deduction, which implies it straight reduces the tax {dollars} you owe. A deduction, however, reduces how a lot of your earnings is topic to taxation. In follow, this implies it’s even higher than a tax deduction normally, and will considerably decrease your tax legal responsibility or get you an even bigger refund.

Who Qualifies for the Earned Earnings Tax Credit score?

The essential qualification for the EITC is easy, however as with all issues IRS, there are many nitty-gritty specifics that may make or break your eligibility. The primary requirement is true there within the identify: you should have earned earnings. You’ll additionally have to:

• Have a Social Safety quantity by the due date of your 2022 tax return (together with extensions).
• Have been a U.S. citizen or resident alien for everything of the tax 12 months in query.
• Be not less than 25 years previous, however not over 65.

In the event you don’t have youngsters, chances are you’ll be eligible primarily based solely on a low earnings. Within the 2022 tax 12 months, you’ll have to have earned an adjusted gross earnings, or AGI, of:

• Lower than $16,480 as a single filer.
• Lower than $22,610 for married {couples} submitting collectively.

In any other case, the earnings limits rely on the variety of youngsters you’ve — and the kids should meet all {qualifications}, which embody age and residency necessities, and a Social Safety variety of their very own.

Moreover, there are some particular guidelines for army and clergy members, as effectively those that earn choose kinds of disabilities advantages. In the event you fall into one in all these classes, undoubtedly try the hyperlinks — these guidelines will aid you decide whether or not sure monies could be claimed as earned earnings and utilized towards eligibility credit score.

How A lot Can You Get From the Earned Earnings Tax Credit score?

Though people with out youngsters have all the time certified for a small earned earnings credit score, it’s usually a lot lower than what’s provided for these with youngsters. Whereas the 2021 tax 12 months noticed briefly elevated EITC quantities (for childless people) attributable to The American Rescue Plan Act, the 2022 EITC quantities are again to regular. In different phrases, the quantities for childless people and households are as soon as once more considerably decrease than these accessible to filers with youngsters.

Learn how to Get the Earned Earnings Tax Credit score

In the event you’re eligible for the Earned Earnings Tax Credit score and able to see its impact in your return, the very first thing it’s essential to do is to file a tax return. You’ll want to do that even for those who don’t owe any taxes or aren’t in any other case required to file — there’s no different method to declare the credit score.

You should utilize U.S. tax kinds 1040 or 1040-SR to say the Earned Earnings Tax Credit score for those who don’t have qualifying youngsters, however for those who do have youngsters, you’ll want to incorporate Schedule EITC along with your 1040. You may as well collect all of the vital documentation and have a tax skilled do the paperwork for you, or benefit from the IRS on-line Free File software.

Understand that for those who declare the EITC, your tax refund could also be delayed. By regulation, the IRS can not concern EITC refunds earlier than mid-February.

Ceaselessly Requested Questions (FAQs) concerning the Earned Earnings Tax Credit score

You’ve received questions concerning the Earned Earnings Tax Credit score, don’t fear — we’ve received solutions.

Penny Hoarder contributor Dave Schafer has been writing professionally for almost a decade, overlaying subjects starting from private finance to software program and client tech. Reporting by Jamie Cattanach and freelancer Larissa Runkle is included on this story.