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Earned Income Tax Credit (EITC) – Refundable Credit

who can claim earned income credit

General Rules

A refundable earned income credit is available to certain low-income individuals who have earned income and meet certain federal requirements for the federal earned income credit. Taxpayers must qualify for and claim the federal earned income credit allowed under I.R.C. В§ 32 as amended and in effect for the taxable year. Taxpayers may claim the credit even if they do not have a filing requirement. To receive the credit, taxpayers must file tax returns and claim the credit. The Massachusetts refundable credit is 15% of the computed federal credit.

The American Taxpayer Relief Act (P.L. 112-240)   makes permanent or extends through 2017 the “ARRA” enhancements to the earned income tax credit.

Tax Relief Act of 2010 (P.L. 111-132) :extended the  provisions contained within “ARRA” through December 31, 2012..

The American Recovery and Reinvestment Act of 2009 (P.L. 111-5 or "ARRA"):  

I.R.C. В§ 32 is amended to increase the earned income tax credit percentage for families with three or more qualifying children to 45% for 2009 and 2010. It also increased the threshold phase-out amounts for married couples filing joint returns to $5,000 above the threshold phase-out amounts for singles, surviving spouses, and heads of household for 2009 and 2010. 

The IRS provides DOR with its Earned Income Credit table showing maximum federal adjusted gross income, number of qualifying children and maximum EITC. The IRS credit is based on federal modified adjusted gross income; the DOR credit is based on the Federal credit.

Married filing separate taxpayers do not qualify for EITC.

  • any taxpayer who has a qualifying child for the taxable year; or
  • any other taxpayer who does not have a qualifying child for the taxable year if all of

    the following criteria are met:

  1. the taxpayer lived in the United States for more than one half of the taxable year;
  2. the taxpayer or the taxpayer's spouse has attained age 25 but not attained age 65 before the close of taxable year; and
  3. the taxpayer is not a dependent of another taxpayer during the taxable year.

Investment Income:

An individual is not eligible for the earned income credit if he or she has "investment income" exceeding certain thresholds. Investment income includes capital gain net income, net passive income, interest, dividends, tax exempt interest and non-business rents and royalties. (See U.S. Publication 596, 2002) For 2014, investment income must be $3,350 or less for the year.

Federal Computation of Earned Income Tax Credit:

  • Taxpayers who choose to have the IRS compute their federal earned income credit should wait until the IRS notifies them of that amount before claiming the credit on the Massachusetts income tax return. If they have not received the federal earned income credit amount as computed by the IRS by the deadline for filing Massachusetts tax return, they may file a  Massachusetts Form 4868, Application for Automatic Six-Month Extension of Time to File Massachusetts Income Tax Return   .
  • If the IRS computes the EITC for eligible taxpayers who did not take the credit on their Massachusetts returns, they can file Massachusetts Form 1 or 1 NR/PY to receive 15% of the federal credit. Taxpayers who did take the credit but need to amend for an increase or decrease based on an IRS adjustment should file Massachusetts Form CA-6.

Maximum 2014 Credit

For Single and Head of Household:

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