The EITC (or Earned Income Tax Credit) is one of the largest and most effective tax stimulus credits the federal government has ever installed into the economy and tax system. This refundable tax credit's goal is to help out the millions of Americans that struggle to make ends meat every year. Enacted in 1975, and expanded multiple times since, this tax credit has direct, economic benefits to low and middle class wage earners, rivaling the effects (and some would argue beating the benefits flatout) to raising the minimum wage.
So, what is Earned Income Tax Credit anyhow?
The EITC is a refundable tax credit meant to help out working individuals or couples, in particular families with children that make a combined annual salary that falls below a certain threshold. Like many stimulus or social safety net programs, the purpose is two fold: 1) to combat the growing amount of millions of American citizens that hover around the national poverty lines. 2) to give the economy an economic boost, as a great majority of the monies accredited go directly toward paying for groceries, auto repairs, debt, etc. The billions every year given as a credit go right back into the economy in one way or another, thus invigorating the economy as a whole.
How do I qualify? & How much would my EITC credit be, if I do qualify?
To qualify for an EITC, you have to first meet the basic criteria of having earned income at some point in the year that you are filing taxes for. Once you meet that basic qualification, to see if you qualify, and for how much, match your annual earned income with the numbers below. This is what the IRS posted on their website for the filing year of 2013
Earned Income and adjusted gross income (AGI) must each be less than:
$46,227 ($51,567 married filing jointly) with three or more qualifying children
$43,038 ($48,378 married filing jointly) with two qualifying children
$37,870 ($43,210 married filing jointly) with one qualifying child
$14,340 ($19,680 married filing jointly) with no qualifying children
Tax Year 2013 maximum credit:
$6,044 with three or more qualifying children
$5,372 with two qualifying children
$3,250 with one qualifying child
$487 with no qualifying children
***Investment income must be $3,300 or less for the year.
Child Rules and Additional Info:
So to qualify for an EITC, obviously it's most beneficial to you if you have multiple children. Clearly the thinking involved is that the child in question is not earning income themselves, thus further burdening those financially responsible for said child. Also keep in the mind the age limits of claiming any given child max out at 19, or up to 23 years of age if that child is in college. Also the child that you claim does not have to be directly descended from you either. To see if someone that you care for would be qualifiable as a dependent that you could claim for an EITC, check out this IRS link: Qualifying Child Rules
The numbers posted above are from 2013, and are subject to slightly change for next year and the years to come. So, be sure to stay up to date on the most current income brackets.
For more information, visit: Do I Qualify for EITC?
Also for a really good and simple breakdown of what an EITC is, how it helps the economy, and how to qualify, check out this video:
The Earned Income Tax Credit (EITC) in 3 minutes