You can qualify for the Earned Income Tax Credit (EITC) when you file your taxes if you had earned income during the year for which you are filing taxes and you had an adjusted gross income below certain limits, which vary depending on how many qualifying children you have. First we’ll show you what the exact rules and income limits are. Later, we’ll explain exactly what “earned income,” “adjusted gross income,” and “qualifying children” actually mean so that you can make sure you understand whether or not you qualify.

Key Terms

Earned Income

To qualify for an EITC, you must have earned income. This can include your wages, salaries, tips, net earnings from self-employment, or any other form of taxable employee pay. You can also choose to include nontaxable combat pay as earned income.

The EITC program considers taxable benefits you get under your employer’s disability retirement plan before the minimum retirement age to be earned income. Benefits payments from a policy you paid the premiums for or that you got after retirement are not considered earned income.

Other things that do not qualify as earned income under the EITC include:

• Interest and dividends
• Social Security and railroad retirement benefits
• Pensions and annuities
• Alimony and child support
• Workers’ compensation benefits
• Unemployment compensation
• Welfare benefits
• Veterans benefits

If you are married and filing jointly, at least 1 spouse must have earned income to be eligible for an EITC.

Adjusted Gross Income

In addition to the earned income requirement, you must have an adjusted gross income below certain levels to qualify for an EITC.

Your adjusted gross income includes all earned income before deductions for taxes, health care or other expenses, minus certain business, education-related, and other expenses. While filling out your annual tax return (IRS Form 1040), you will be asked a series of questions that will let you figure out what your adjusted gross income is.

Qualifying Children

For a child to be considered a “qualifying child” under the Earned Income Tax Credit (EITC), several requirements must be met:

• Relationship: If you are claiming one or more children, they must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these (for example, your grandchild, niece, or nephew).
• Residence: For more than half the year, the child must live at the same residence as you do and the child must have a valid Social Security number.
• Age: At the end of the tax year, the child must be under 19. Or, if going to school full-time, the child must be under 24.
  • Exception: If your child is permanently and totally disabled, there is no age requirement.

According to the IRS, a person is considered “permanently and totally disabled” if:

• Their condition is expected to last continuously for at least 1 year or is expected to result in death, and
• They cannot perform any Substantial Gainful Activity (SGA), which means they are unable to earn more than $1,620 per month ($2,700 if they are blind).

Qualifying children can only be used by 1 family member to claim an EITC.

If you qualify, you will claim your Earned Income Tax Credit (EITC) when you file your federal tax return, IRS Form 1040. If you have a qualifying child, be sure to attach a Schedule EIC.

To calculate the value of your EITC, you can use the Earned Income Credit Worksheet in your 1040 instruction booklet. Or you can ask the IRS to calculate it for you by noting an “EIC” on the Earned Income Credit line on your tax return.

To figure out whether or not you are eligible for an EITC and what its value might be, use the IRS EITC Assistant. The Center on Budget and Policy Priorities Earned Income Tax Credit Estimator can also help you figure out how much your EITC might be.

Tax Preparation Tips for Claiming the EITC

Keep all your W-2 forms and keep a record of all those you have worked for during the year. This will make things simpler when it comes time to file your taxes.

Be sure to file your taxes, even if your income is lower than the amount at which you are legally required to file. You might be eligible for an EITC or some other tax credit that you can’t get without filing. Many families with children who qualify for an EITC may also be eligible for a Child Tax Credit (CTC).

Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI)

You must have some form of earned income to qualify for an Earned Income Tax Credit (EITC). Neither SSI nor SSDI benefits count as earned income for the EITC. You can, however, be on SSI or SSDI benefits and claim an EITC, as long as you have some form of earned income.

If you're on SSI, federal tax refunds will not count as income or assets for 12 months. If you save the money longer than that, Social Security will count that money toward SSI's asset limit, unless you save the money in an Individual Development Account (IDA) or a Plan to Achieve Self-Support (PASS).

Individual Development Accounts (IDAs)

Money from an EITC can be put into an IDA. This lets you get matching funds from the IDA program sponsor.

Plans to Achieve Self-Support (PASS)

Money from an EITC can be set aside in a PASS. This will help you reach your employment goals more quickly by boosting the amount of money you have available in your PASS account.

Long-Term Disability (LTD) Insurance

Employer-paid Long-Term Disability (LTD) Insurance benefits that you got before retirement count as earned income under the EITC and can therefore be used to qualify for the program. Disability income insurance benefits which you pay the premiums for or that you get after retirement are not considered earned income and can’t be used to qualify for an EITC.