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Who Qualifies for the Earned Income Credit

Posted on February 1st, 2021

The earned income tax credit can give qualifying workers with low-to-moderate income a substantial financial boost. The credit not only reduces the amount of tax someone owes but may give them a refund even if they don’t owe any taxes or aren’t required to file a return. If you lost your job in 2020 or your earnings were significantly lower, you may qualify for the earned income tax credit; however, taxpayers must meet certain requirements and file a federal tax return in order to receive this credit. Here’s what you need to know

Tax TipThere’s a new rule this tax season to help people impacted by a job loss or change in income in 2020. Taxpayers can use their 2019 earned income to figure your EITC, if their 2019 earned income was more than their 2020 earned income. The same is true for the additional child tax credit.

EITC eligibility

Taxpayers qualify based on their income and the filing status they use on their tax return. The credit can be more if they have one or more children who live with them for more than half the year and meet other requirements. As such, a taxpayer’s eligibility for the credit may change from year to year and can be affected by major life changes such as:

  • A new job or loss of a job
  • Unemployment benefits
  • A change in income
  • A change in marital status
  • The birth or death of a child
  • A change in a spouse’s employment situation

Taxpayers who are married filing separately can’t claim EITC.

Those who are working and earned less than these amounts in 2020 may qualify for the EITC:

Married filing jointly:

  • Zero children: $21,710
  • One child: $47,646
  • Two children: $53,330
  • Three or more children: $56,844

Head of household and single:

  • Zero children: $15,820
  • One child: $41,756
  • Two children: $47,440
  • Three or more children: $50,954

The maximum credit amounts are based on whether the taxpayer can claim a child for the credit and the number of children claimed. For example, the maximum credit for one child is $3,584 and for two children is $5,920.

For more information about this and other tax credits and deductions you might qualify for when you file your tax return this year, please call our office.

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