Table of Contents
- Rule 1—Adjusted Gross Income (AGI) Limits
- Rule 2—You Must Have a Valid Social Security Number (SSN)
- Rule 3—Your Filing Status Cannot Be Married Filing Separately
- Rule 4—You Must Be a U.S. Citizen or Resident Alien All Year
- Rule 5—You Cannot File Form 2555 or Form 2555-EZ
- Rule 6—Your Investment Income Must Be $3,350 or Less
- Rule 7—You Must Have Earned Income
This chapter discusses Rules 1 through 7. You must meet all seven rules to qualify for the earned income credit. If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the publication.
If you meet all seven rules in this chapter, then read either chapter 2 or chapter 3 (whichever applies) for more rules you must meet.
Your adjusted gross income (AGI) must be less than:
$46,997 ($52,427 for married filing jointly) if you have three or more qualifying children,
$43,756 ($49,186 for married filing jointly) if you have two qualifying children,
$38,511 ($43,941 for married filing jointly) if you have one qualifying child, or
$14,590 ($20,020 for married filing jointly) if you do not have a qualifying child.
Example—AGI is more than limit.
Your AGI is $38,550, you are single, and you have one qualifying child. You cannot claim the EIC because your AGI is not less than $38,511. However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,941.
To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). Any qualifying child listed on Schedule EIC also must have a valid SSN. (See Rule 8 if you have a qualifying child.)
If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. An example of a federally funded benefit is Medicaid. If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U.S. citizen or permanent resident, ask the SSA for a new social security card without the legend. If you get the new card after you have already filed your return, you can file an amended return on Form 1040X, Amended U.S. Individual Income Tax Return, to claim the EIC.
Request an automatic 6-month extension of time to file your return. You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. For more information, see the instructions for Form 4868.
File the return on time without claiming the EIC. After receiving the SSN, file an amended return, Form 1040X, claiming the EIC. Attach a filled-in Schedule EIC, Earned Income Credit, if you have a qualifying child.
If you are married, you usually must file a joint return to claim the EIC. Your filing status cannot be “Married filing separately.”
If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. You can use that filing status only if one spouse is a U.S. citizen or resident alien and you choose to treat the nonresident spouse as a U.S. resident. If you make this choice, you and your spouse are taxed on your worldwide income. If you need more information on making this choice, get Publication 519, U.S. Tax Guide for Aliens. If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 66a (Form 1040) or in the space to the left of line 42a (Form 1040A).
You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. U.S. possessions are not foreign countries. See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for more detailed information.
You cannot claim the earned income credit unless your investment income is $3,350 or less. If your investment income is more than $3,350, you cannot claim the credit.
Use this worksheet to figure investment income for the earned income credit when you file Form 1040.
Complete this worksheet only if Form 8814 includes an Alaska Permanent Fund dividend.
|Note. Fill out a separate Worksheet 2 for each Form 8814.|
|1.||Enter the amount from Form 8814, line 2a||1.|
|2.||Enter the amount from Form 8814, line 2b||2.|
|3.||Subtract line 2 from line 1||3.|
|4.||Enter the amount from Form 8814, line 1a||4.|
|5.||Add lines 3 and 4||5.|
|6.||Enter the amount of the child's Alaska Permanent Fund dividend||6.|
|7.||Divide line 6 by line 5. Enter the result as a decimal (rounded to at least three places)||7.|
|8.||Enter the amount from Form 8814, line 12||8.|
|9.||Multiply line 7 by line 8||9.|
|10.||Subtract line 9 from line 8. Enter the result on line 4 of Worksheet 1||10.|
|(If filing more than one Form 8814, enter on line 4 of Worksheet 1 the total of the amounts on line 10 of all Worksheets 2.)|
Example—completing Worksheet 2.
Your 10-year-old child has taxable interest income of $400, an Alaska Permanent Fund dividend of $1,000, and ordinary dividends of $1,100, of which $500 are qualified dividends. You choose to report this income on your return. You enter $400 on line 1a of Form 8814, $2,100 ($1,000 + $1,100) on line 2a, and $500 on line 2b. After completing lines 4 through 11, you enter $400 on line 12 of Form 8814 and line 21 of Form 1040. On Worksheet 2, you enter $2,100 on line 1, $500 on line 2, $1,600 on line 3, $400 on line 4, $2,000 on line 5, $1,000 on line 6, 0.500 on line 7, $400 on line 8, $200 on line 9, and $200 on line 10. You then enter $200 on line 4 of Worksheet 1.
This credit is called the “earned income” credit because, to qualify, you must work and have earned income. If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. If you are an employee, earned income includes all the taxable income you get from your employer.
Rule 15 has information that will help you figure the amount of your earned income. If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the Form 1040 instructions.
Earned income includes all of the following types of income.
Wages, salaries, tips, and other taxable employee pay. Employee pay is earned income only if it is taxable. Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained later in this chapter.
Net earnings from self-employment.
Gross income received as a statutory employee.
This section is for persons who have an approved:
Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or
Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits.
Each approved form exempts certain income from social security taxes. Each form is discussed here in terms of what is or is not earned income for the EIC.
If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age.
Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Report taxable pension payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b.
Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Do not include any of these items in your earned income.
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