Earned Income Credit
The Earned Income Credit (EIC or EITC) is a refundable tax credit for workers with lower incomes. “Refundable” credit means that if your credit is more than the taxes you owe, the IRS pays you money at tax time. If you qualify for an EIC, the IRS will pay you money even if you don't owe any taxes.
If you have a child, you may qualify for the Earned Income Credit and the Child Tax Credit. (The EIC is not the same as the Child Tax Credit.) Very low-income people without children may also qualify for the Earned Income Credit.
If your credit is less than the taxes you owe, the EIC can lower the amount you have to pay. Or the EIC may mean that you do not have to pay any taxes at tax time.
Rules for Everyone
To claim the EIC, you must pass these tests:
- You must have earned income .* (See “What is Earned Income” below to find out what counts and what does not count as earned income.) Your earned income in 201 must have been less than:
- $14,590 if you do not have a qualifying child ($20,020 if married filing jointly)
- $38,511 if you have one qualifying child ($43,941 if married filing jointly)
- $43,756 if you have two qualifying children ($49,186 if married filing jointly)
- $46,997 if you have three or more qualifying children ($52,427 if married filing jointly)
- You must have a valid Social Security number that allows you to work.
- Your filing status cannot be "married filing separately."
- You must be a U.S. citizen or resident alien all year.
- You cannot file form 2555 or form 2555-EZ (relating to foreign earned income).
- Your investment income must be $3,350 or less.
- professional fees and
- income from self-employment
- child support
- other types of public benefits (such as SSI and SS disability benefits)
If you have a qualifying child, you can get a bigger credit. A qualifying child:
- must meet the age, relationship, and residency tests (see below)
- cannot be used by more than one person to claim the EIC. However, the parent the child lives with for more than half of the year can claim the EIC even if the other parent can claim the child as a dependent.
- cannot be a qualifying child of another person
Your child must be your son, daughter, adopted child, grandchild, stepchild, sibling or stepsibling (or their descendants), or a foster child placed in your home by an authorized placement agency. The child must live in your home for more than half of the year.
- Under age 19 at the end of the year, or
- A full-time student under age 24 at the end of the year, or
- Permanently and totally disabled at any time during the year, regardless of age.
Your child must have lived with you in the United States for more than half of 2014. "In the United States" means in one of the 50 states or the District of Columbia. Your child must have a valid Social Security number.
Rules If You Do Not Have a Qualifying Child
Individuals who have very low incomes and who do not have a qualifying child may be able to get EIC. To get EIC, you:
- must be a least age 25 and under age 65
- cannot be the dependent of another person
- cannot be a qualifying child of another person
- must have lived in the United States more than half of the year.
We often hear these questions:
- How much is the EIC?
- $496 for a taxpayer with no qualifying child
- $3,305 for a taxpayer with one qualifying child
- $5,460 for a taxpayer with two qualifying children
- $6,143 for a taxpayer with three or more qualifying children
No, it is not true. You can and should claim the EIC. Only the parent who has "primary residence" of the children may claim them as qualifying children for EIC.
Even if the other parent pays child support and claims the children as dependents, the other parent cannot claim the children for EIC if they live with you most of the time.
Claiming the EIC when the other parent claims it will lead to an audit of your tax return. The audit will give you the chance to prove that you are eligible to claim the EIC.
Contact Vermont Legal Aid at 1-800-889-2047 for help with your audit.
Yes. Only the parent with whom the children live for more than one-half the year may claim the EIC for those children.
Federal law does not allow parents to "take turns" claiming the EIC unless the child actually changes where they live each year. When a non-custodial parent (the parent the children don’t live with) claims the EIC for “household with children,” that parent may face big penalties and may have to pay back all EIC amounts that shouldn’t have been claimed.
If you agree that the other parent can claim the EIC, even though the children live mainly with you, you are helping the other parent to violate the tax code. You may also face IRS penalties.
Vermont Earned Income Tax Credit
If you qualify for and receive an EIC from the IRS, you will also qualify for a Vermont Earned Income Tax Credit .Source: www.vtlawhelp.org