First comes love, then comes marriage, then comes a baby… and the Earned Income Tax Credit?
Here’s one for the next round of Jeopardy: the Earned Income Tax Credit or EITC was designed to offset the burden of Social Security taxes paid by low to middle income working families.
And here’s one you can take to bank: if you find yourself struggling to provide for your family you may qualify for the EITC and increase your refund at tax time .
Whether you qualify, not to mention the amount of the credit you’ll receive, depends on your income and how many qualifying children you’re supporting.
Eligibility is based on your income and your filing status
First, in order to qualify, you must file your tax return as married filing jointly. Your filing status can not be filing separately.
Second, your income earned (that is, the wages you received from your job or the net profits you made from self employment), can not exceed a certain threshold.
If you’re married filing jointly, your 2014 adjusted gross income, must be less than:
- $52,427: 3 or more qualifying children
- $49,186: 2 qualifying children
- $43,941: 1 qualifying child
- $20,020: no qualifying children
One more thing: if you have investment income and it’s greater than $3,350, you won’t qualify to claim the credit. This applies even if your wages on their own would have made you eligible for the credit.
Is Your Son or Daughter a Qualifying Child?
The number of children you have, and how much you contribute to their support, plays a big role in how much you’ll receive from the credit.
That’s provided each child meets the IRS criteria. For instance, your 32 year old son still living at home won’t qualify. Neither will your daughter who lives with your ex for more than half of the year.
A child qualifies if he or she meets the following criteria:
- Relationship: related to you by birth, marriage, adoption or foster arrangement
- Age: 18 years of age or younger, or 23 years or younger and a full-time student
- Residency: the child must live with you in the US for more than half the year
- Social Security Number: the child must have a valid social security number
Also, if your child is married, he or she cannot file a joint return with his or her spouse.
Don’t have a qualifying child? You can still claim the credit as long as you or your spouse are at least 25 years old but under 65 (sorry grandma and grandpa).
For each qualifying child, the EITC increases
The amount you’ll receive really goes up depending on the number of children you have.
Here’s how much you can expect to receive:
- $6,143: 3 or more qualifying children
- $5,460: 2 qualifying children
- $3,305: with 1 qualifying child
- $496: no qualifying children
To claim the EITC, you’ll need to file
All too often, the Earned Income Tax Credit is overlooked. If you didn’t qualify to claim the credit last year, it doesn’t mean you won’t qualify this year.
To claim the credit or learn if you qualify, create an account on RapidTax. Once you’ve entered your basic information and income, we’ll let you know whether or not you can claim the credit and how much you’ll receive in your tax refund.
Don’t miss out on money you’re entitled to receive. File your 2014 taxes today and reach out to the RapidTax team with any questions you have. We’re here to help. Photo via Keoni Cabral on FlickrFriday, March 27th, 2015 at 1:58 pm and is filed under Tax Deductions and Credits | Blog.