Earned Income Tax Credit (EITC) is a tax credit available to low and middle-income working individuals and families. It helps taxpayers to keep more of their earned income. To take advantage of this refundable tax credit, you have an annual income of less than $50,000.
In 2013 through 2017, the Earned Income Tax Credit has been increased for working families with more than two dependents. Previous to 2009, the tax credit maxed out at two dependents, meaning a qualifying family with three or more dependents would receive the same tax credit as a family with two dependents. When filing tax returns for 2013, eligible taxpayers that have more than two dependents receive an increased amount for EITC.
There are many qualifying criteria for EITC, including:
- Income levels of both earned income and adjusted gross income
- The age, relationship of the dependent(s)
- Shared residency requirements of the dependent(s)
The amount of the tax credit depends on your earned income and how many qualifying children you claim the credit for. The maximum EITC for the tax year 2013 are:
- $475 with no qualifying children
- $3,169 with one qualifying child
- $5,236 with two qualifying children
- $5,891 with three or more qualifying children
To claim EITC, your filing status must be single, head of household, qualifying widow(er) with dependent child or married filing jointly.
When calculating earned income, be sure not to include unearned income. Child support, interest and dividends, social security, pension payments, annuity, disability benefits, alimony, unemployment compensation and welfare benefits are not considered earned income.
Low and middle-income groups may want to check if they qualify for the Earned Income Tax Credit when preparing returns. It will help them to save in taxes significantly on their earned income of 2013.