If you aren’t eligible for the earned income tax credit, or EITC, it means you make too much money to get it. If you are eligible for the EITC, it means you can get a significant tax break.
“It’s a valuable benefit for those who qualify, but it is also one that many taxpayers overlook or misunderstand, leading to missed opportunities for tax savings,” says Varsha Subramanian, a certified public accountant at FlyFin.tax, an A.I.-powered tax service for freelancers.
So what is the earned income tax credit, who is eligible and how do you get the EITC if you are? Here’s what you need to know.
[READ: Why Tax Refunds May Be Smaller in 2023.]
What Is the Earned Income Tax Credit?
The earned income tax credit has been around since 1975, designed to help low and moderate income households get out of poverty. It’s a work credit, so you have to be employed to get it — and it may erase or reduce any federal tax that you owe if you qualify.
In 2022, 31 million workers and families received about $64 billion in earned income tax credits, after filing their 2021 taxes, according to the Internal Revenue Service. The average amount of EITC that taxpayers received was $2,043.
Who Qualifies for the Earned Income Tax Credit?
It all comes down to how much money you make. Per the IRS, you are qualified for the EITC if your income falls within the following limits in 2022:
| Number of Qualifying Children | Single Filer | Married Filing Jointly |
| Zero | $16,480 | $22,610 |
| One | $43,492 | $49,622 |
| Two | $49,399 | $55,229 |
| Three or more | $53,057 | $59,187 |
Note that you must provide valid Social Security Numbers for each qualifying child.
There are some other factors you’ll need to pay attention to:
— Your investment income in 2022 needs to have been below $10,300.
— You’ll need to have had a valid SSN by the due date of your 2022 return, including extensions.
— You’ll need to have been a U.S. citizen or resident alien for all of 2022.
— If you file Form 2555, which is related to foreign earned income, you will not be eligible for the EITC.
How Much Can I Get From the Earned Income Tax Credit?
The more children you have, the more you’ll receive. Here’s how it breaks down:
| Number of Qualifying Children | EITC Amount |
| No dependents | Up to $560 |
| One | Up to $3,733 |
| Two | Up to $6,164 |
| Three or more | Up to $6,935 |
And note the words “up to,” meaning you may get less than those amounts. Generally, the lower your income, the higher the tax credit.
How Do I Claim the Earned Income Tax Credit?
For starters, you’ll need to file your federal taxes, even if you earn less than the 2022 standard deduction (which is $12,950 for single filers and those married filing separately, $25,900 for joint filers or $19,400 for heads of household).
You can file through the Free File Alliance website, a nonprofit coalition of tax software companies partnered with the IRS that offers free electronic tax filing services. (It’s free for anyone who has a 2022 adjusted gross income of $73,000 or less. There may be other qualifying criteria, depending on what type of software company you use.)
A good tax software program should alert you if you are eligible for the EITC.
[Read: How to File Taxes for Free.]
Common Mistakes That Taxpayers Make with the Earned Income Tax Credit
There are some mistakes taxpayers who try to claim it tend to make, according to Subramanian. A few things you’ll want to be watching for:
— Filing incorrectly. For instance, filing as single or head of household when you should file as married filing jointly. “In some cases, married couples may miss out on the total credit amount because they file as single or head of household instead of married filing jointly,” Subramanian says.
— Your kids, or some of them, don’t qualify. “Taxpayers must accurately report the number of qualifying children to receive the correct credit amount,” Subramanian says. “Most errors happen because the child you claim doesn’t meet the qualification rules or if more than one person claims your child as a dependent.”
— Getting some of the information wrong on your taxes. Whether you make a typo in a name, make a math error or mistype a Social Security number, mistakes like these happen fairly frequently, according to Subramanian.
— Incorrectly reporting earned income. “The credit amount is based on the taxpayer’s earned income, so it is essential to report the correct amount,” Subramanian says.
A big, common error, Subramanian says, is not being aware of the EITC in the first place and being eligible for it but not claiming it.
[READ: Tax Write-Offs You Shouldn’t Overlook.]
What if I Forgot to Claim the Earned Income Tax Credit?
If you’re reading this and think, “I bet I should have claimed the earned income tax credit in previous years,” you do have options.
“If taxpayers realize they should have claimed the Earned Income Tax Credit but didn’t, they may still be able to claim it for up to three years after the original tax return due date,” Subramanian says. “To do so, they must file an amended tax return using Form 1040X, Amended U.S. Individual Income Tax Return. They must submit the amended return within three years from the original due date or within two years from the date the tax was paid, whichever is later.”
The final word on the earned income tax credit: If you’re eligible for the EITC, you should definitely claim it. It’s your money, and it’ll reduce your tax bill.
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What Is the Earned Income Tax Credit and Who Qualifies? originally appeared on usnews.com
Update 02/22/23: This story was published at an earlier date and has been updated with new information.
