Many of the tax rule changes under the 2017 Tax Cuts and Jobs Act eliminated or reduced tax benefits that we were used to. For example, miscellaneous itemized deductions and personal exemptions are gone and deductible state and local taxes are capped at $10,000. Isn’t there any good news about taxes? Yes! The Earned Income Tax Credit, or EITC, still exists!
EITC is a valuable tax benefit for working people with low-to-moderate income. Eligibility and the credit amount depend on your earned income and number of eligible children in your household. For example, in 2019, a married couple that earns up to $52,493 with two eligible children could get a $5,828 federal tax credit. For 2018, the average EITC credit was $2,445.
Five things that you should know about EITC:
- A tax credit is even better than a tax deduction because it’s a dollar-for-dollar tax liability reduction, not just a reduction of taxable income.
- EITC is a refundable credit and could reduce your tax liability to a “negative” amount. Your refund could be even bigger than the amount of federal taxes that were withheld from your paycheck.
- Taxpayers qualify based on their income, the number of children they have, and the filing status they use on their tax return. For a child to qualify, they must live with the taxpayer for more than six months of the year.
- To qualify for EITC, you must have earned income (e.g., wages or self-employment income) that cannot exceed an IRS-specified amount that is adjusted annually. Taxpayers may move in and out of EITC eligibility, especially after major life events.
- To get the credit, you must file an income tax return, even if you do not owe any tax or are not otherwise required to file.
Some people don’t know about EITC or they do not know that they qualify. Each year, 30% of the EITC-eligible population is new to this valuable tax credit, many of whom don’t know about it. Not taking a credit that you qualify is just like giving away money! Who wants to do that? Don’t miss out on your EITC refund. Don’t let your friends and family miss out on their EITC refunds.
Need help? Get details about income limits, credit amounts and eligibility at https://www.irs.gov/newsroom/the-earned-income-tax-credit-can-put-money-in-taxpayers-pockets.