Earned Income Tax Credit Limitations

Earned Income Tax Credit Limitations

The Earned Income Tax Credit (EITC) is a tax credit for the lower to middle income group earners. The criteria to be eligible for the EITC is that you must be a US citizen with a valid Social Security number or a resident alien all year or a non-resident alien but married to a US citizen or a US resident alien filing a joint return. In addition, you cannot be a married person filing a separate tax return and you must not be a qualifying child of another taxpayer.

As far as income is concerned, you have to be earning your wages either as an employee or operating your own business or a farm. If you have children, you must either have a qualifying child or be above 25 and below 65 years of age if you are childless. You must have lived in the US for at least 6 months and not qualify as a dependent of another person.
If you qualify to claim the EITC, it will reduce your tax liability and may even give you some money back. It applies to all your earned income including all taxable income and wages you earn from working in your job or business or farm. Taxable income is defined as wages, salaries, tips, disability benefits, union strike benefits and net earnings from self-employment.

For the 2012 Tax Year, the maximum earned income you must have is $13,980 ($19,190 if married filing jointly) with no qualifying children. If you have one qualifying child, you cannot earn more than $36,920 ($42,130 if married filing jointly). Those who have two qualifying children cannot earn more than $41,952 ($47,162 if married filing jointly). And $45,060 ($50,270 if married filing jointly) is the maximum earned income you can have if you have three or more qualifying children.

Here’s the maximum amount of credit you can claim for the 2012 Tax Year:

• $5,891 with three or more qualifying children
• $5,236 with two qualifying children
• $3,169 with one qualifying child
• $475 with no qualifying children

The computation for the EITC credit can be found in the Earned Income Credit Worksheet (EIC Worksheet) in the instruction booklet for Form 1040, Form 1040A, or Form 1040EZ, and the Earned Income Credit (EIC) Table in the instruction booklet.

For the 2013 Tax Year, the IRS has just released the limits:


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