Qualifying for the Earned Income Tax Credit

Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

FS-2018-01, January 2018

The Earned Income Tax Credit is a financial boost for families with low- or moderate- incomes. Millions of workers may qualify for the first time this year due to changes in their marital, parental or financial status. The EITC is a refundable tax credit. This means workers may get money back, even if they owe no tax. In 2017, almost 27 million taxpayers received over $65 billion in EITC.

The IRS urges workers who earned $53,930 or less in 2017 to see if they qualify. This includes people who work for someone else and those who have their own business or farm.  One way they can see if they qualify is to use the EITC Assistant on IRS.gov. Using the EITC Assistant helps taxpayers because EITC is complex and many special rules apply. To get it right, the IRS also encourages all workers to seek out free tax help through the IRS Free File program, or at a local free tax preparation site. These sites are staffed by IRS-trained community volunteers who can help make sure a taxpayer is eligible for the credit.

Credit Limits for Tax-Year 2017

The amount of EITC varies based on income, filing status and family size. Those who qualify for EITC for tax year 2017 can get a credit from:

  • $2 to $510 with no qualifying children
  • $9 to $3,400 with one qualifying child  
  • $10 to $5,616 with two qualifying children
  • $11 to $6,318 with three or more qualifying children

Not everyone qualifies for the maximum credit. Last year, the average credit was $2,445.

Qualifying for EITC

To qualify, workers must have earned income and adjusted gross income within certain limits and meet certain basic rules. Then, the worker must meet the rules for those without a qualifying child or have a child who meets all the qualifying child rules for the worker or the worker’s spouse, if filing a joint return.

Only one person can claim the same qualifying child.

If a child meets the rules to be a qualifying child for more than one person, only one person can use that child to claim the EITC. Also, if the child qualifies for both a parent and a non-parent, the non-parent can only get the credit if he or she has a higher AGI than either of the child’s parents. The person who does not claim the qualifying child after applying the tie-breaker rules may now claim the EITC without a qualifying child, if all other requirements are met.

Combat Pay Normally Exempt from Tax, Not Included in AGI

Under a special rule, those who receive combat pay can choose to count all the combat pay as taxable income for figuring out the amount of the EITC. This may or may not increase the amount of the EITC. The IRS encourages those receiving combat pay to figure their taxes reporting the amount of their combat pay and without claiming it to make sure they get the best tax benefit. There are also special rules for those with certain types of disability income and members of the clergy.

To learn more about eligibility, visit Who Qualifies for EITC at IRS.gov/EITC. Or, to make it easy, use the EITC Assistant to help navigate the rules.

Social Security Numbers Required for Everyone

The IRS reminds taxpayers to be sure they have valid a SSN themselves, their spouse if filing a joint return, and each qualifying child before they file their return. Also, they must have the SSN before the due date of the return, including qualifying extensions. For most people, the due date of the return is April 17, 2018. Most taxpayers can extend the due date for their 2017 tax return to October 15, 2018. There are special rules for those in the military or for those out of the country.

Refunds Delayed

By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.

The IRS expects the earliest EITC/ACTC related refunds to be in taxpayer bank accounts or debit cards starting February. 27, 2018, if they chose direct deposit and there are no issues with the tax return.

Avoid Errors

Taxpayers are always responsible for the accuracy of their own return, even when someone else prepares the return. Because the EITC is complex, many people claiming it make mistakes. Workers should get help if they are not sure if they qualify. Common errors include:

  • Claiming a child who does not meet all four of the tests for a qualifying child, age, residency in the U.S., relationship and joint return.
  • Filing as single or head of household when married.
  • Reporting incorrect income or expense amounts.
  • Missing or incorrect SSN for self, spouse or qualifying children.

Claiming the EITC in Error Can Have Lasting Impact

Filing a tax return with an error on the EITC claim can:

  • Delay the EITC part of the refund until the IRS corrects the error. The delay can take several months.
  • Cause the IRS to deny all or part of the EITC. If this happens, the taxpayer:
    • Must pay back the amount of EITC paid in error plus interest.
    • May need to file the Form 8862, Information to Claim Earned Income Credit after Disallowance, to claim the EITC again.
    • If the error is because of reckless or intentional disregard of the rules, the IRS could ban the taxpayer from claiming EITC for the next two years.
    • If the error is because of fraud, the ban could last the next 10 years.

Workers Should Help Their Preparers File a Return Correctly

When a taxpayer pays someone to prepare their return, the preparer and the firm he or she works for have additional responsibility to make sure the return is correct. Expect any preparer, whether paid or not, to ask many questions. Help your preparer by answering all questions and by bringing all the documents the preparer needs to get the return correct. Find out what documents to bring by visiting IRS.gov/eitc.

How to Claim the EITC

To claim the EITC, taxpayers need to file a Form 1040, 1040A or 1040EZ. If a taxpayer is claiming the EITC with a qualifying child, he or she must complete and attach the Schedule EIC to the tax return. Schedule EICPDF provides the IRS with information about a qualifying child or children, including their names, ages, SSNs, relationship to the taxpayer and the amount of time they lived with the taxpayer during the year.

Letter from the IRS

In some cases, a taxpayer may receive a letter from the IRS requesting additional information. To avoid further refund delay, respond promptly to the letter. Also, it is very important that the taxpayer call the number on the notice and let the IRS know if he or she needs more time for a complete response. If the taxpayer needs help, they should call the phone number on the letter. For further tips on responding to these letters, visit EITC Notices on IRS.gov/EITC.

How to Get Free Tax Help

Taxpayers can see if they qualify by using the EITC Assistant tool on IRS.gov. Find information on who qualifies, how to claim, and more about EITC on irs.gov/eitc.

Those who may qualify for EITC should consider free tax preparation services. Many organizations provide free tax return preparation for those with income below $53,930 and senior or disabled taxpayers at thousands of volunteer sites nationwide.

The Volunteer Income Tax Assistance program offers free tax preparation for low-to moderate-income taxpayers. To find a nearby VITA site, visit IRS.gov and type the word VITA in the search box and click on “Free tax return preparation for you by volunteers” or call the IRS at 800-906-9887.

Tax Counseling for the Elderly offers priority assistance to people who are 60 years of age and older. To find a TCE site, visit the AARP locator web page.

Active duty military members and their families can receive free tax preparation assistance at VITA sites within their installations. The volunteers can address military specific tax issues.

EITC-eligible workers can also seek free assistance using other IRS options such as IRS Free File, the free tax preparation and electronic filing program, available only at IRS.gov/freefile and provided by software companies. Free File, is a public-private partnership that provides a free way to do a federal tax return either by using brand-name software or online fillable forms. Free File software is available now to millions of individuals and families that earn $66,000 or less. Some software companies also offer free state tax return filing to those who are eligible for the state EITC.

Many e-file software providers and tax professionals also provide free services for low- income taxpayers.

EITC and Other Benefit Programs

Refunds received from the EITC or any other tax credit are not used to determine eligibility for any federal or federally funded public benefit program such as Medicaid, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (food stamps), low-income housing or most Temporary Assistance for Needy Families (TANF) payments. Those who save their tax credit for more than 30 days should contact their state, tribal or local government benefit coordinator to find out if their benefits count as assets.

Unemployment benefits are not earned income and can’t be used to claim the EITC. But they are taxable income and may affect the amount of EITC a person may get.

Qualify for EITC?

See what other tax credits may be available.

Related items:

  • EITC Home Page (irs.gov/eitc)
  • IRSvideos, available on YouTube, provide information about credits, deductions.
  • and tax law changes. The IRS also has videos in Spanish (IRSvideosMultilingua) and American Sign Language (IRSvideosASL).
  • IRS audio files, informal tax messages in English and Spanish, can be used for podcasts or to play on a portable device.
  • Publication 596, Earned Income Credit, offers a detailed overview of the EITC, the eligibility rules and instructions on how to claim it.
  • @IRSnews and @IRSenEspanol, the IRS Twitter news feeds, provide the latest federal tax news and information for taxpayers in English and Spanish.