What is the Earned Income Tax Credit?
The Earned Income Tax Credit, or the EITC or EIC, is a refundable tax credit for low- and moderate-income workers. In 2021, the earned income credit ranges from $1,502 to $6,728 depending on tax-filing status, income and number of children. People without kids can qualify.
If you fall within the guidelines for the credit, be sure to claim it on your return when you do your taxes And if you didn’t claim the earned income credit when you filed your taxes in the last three years but you think you qualified for it, the IRS encourages you to let it know so you can get that money back.
The $1.9 trillion American Rescue Plan Act changed some of the rules around the EITC. These changes are noted below.
How does the Earned Income Tax Credit work?
Here are some quick facts about the Earned Income Tax Credit:
For the 2021 tax year (the tax return you'll file in 2022), the earned income credit ranges from $1,502 to $6,728 depending on your filing status and how many children you have.
You can use either your 2019 income or 2021 income to calculate your EITC — you might opt to use whichever number gets you the bigger EITC. Be sure to ask your tax preparer to run the numbers both ways.
You don't have to have a child in order to claim the earned income credit.
The earned income tax credit doesn't just cut the amount of tax you owe — the EITC could also score you a refund, and in some cases a refund that's more than what you actually paid in taxes.
Who qualifies for the Earned Income Tax Credit?
Besides staying below the income thresholds noted above, there are other qualification rules and requirements. Here are the big eligibility rules, but you can also check out our quiz below for a quick read on whether you might qualify for the earned income tax credit.
You must have at least $1 of earned income (pensions and unemployment don't count).
Your investment income must be $3,650 or less. Starting in 2021 (filing in 2022) that amount increases to $10,000.
In 2021, you can qualify for the EITC if you’re separated but still married. To do so, you can’t file a joint tax return and your child must live with you for more than half the year. You also must have not lived with your spouse during the last six months or you must have a separation agreement or decree.
You must not have to file Form 2555, Foreign Earned Income; or Form 2555-EZ, Foreign Earned Income Exclusion.
There are special EIC rules for members of the military and the clergy, as well as for people who have disability income or who have children with disabilities.
Income limit for the earned income credit
Below are the maximum earned income tax credit amounts, plus the max you can earn before losing the benefit altogether.
2021 Earned Income Tax Credit
(for taxes due in April 2022)
Number of children
Maximum earned income tax credit
Max earnings, single or head of household filers
Max earnings, joint filers
3 or more
Both your earned income and your adjusted gross income each have to be below the levels in the table.
In general, the less you earn, the larger the earned income credit.
Your earned income usually includes job wages, salary, tips and other taxable pay you get from your employer. Your adjusted gross income is your earned income minus certain deductions.
Kids and the Earned Income Tax Credit
If you claim one or more children as part of your earned income credit, each must pass certain tests to qualify:
The child can be your son, daughter, adopted child, stepchild, foster child or grandchild. The child also can be your brother, sister, half-brother or half-sister, stepbrother or stepsister or any of their children (your niece or nephew).
The child must be under 19 at the end of the year and younger than you or your spouse if you're filing jointly, OR the child must be under 24 if he or she was a full-time student. There's no age limit for kids who are permanently and totally disabled.
The child must have lived with you or your spouse in the United States for more than half the year.
For each child you're claiming with the EITC, you’ll also need:
A Social Security number (be sure to use the child’s name and Social Security number exactly as they appear on the Social Security card).
His or her birthdate.
Starting in 2021, if your children don’t meet the requirements for the EITC, you can still claim the EITC as if you have no children.
If you don't have kids
You may be able to get the EITC if you don’t have a qualifying child but meet the income requirements for your filing status. To qualify, you must meet three more conditions:
You must have resided in the United States for more than half the year.
No one can claim you as a dependent or qualifying child on his or her tax return.
For the 2021 tax year (the tax return you file in April 2022), you must be at least 24 if you were a student for at least five months of the year, 18 if you were in foster care any time after turning 14 or were homeless in any taxable year, and at least 19 otherwise. Also in 2021, there is no maximum age limit for the credit.
Not only does an error on your tax form delay the EIC part of your refund — sometimes for several months — but it also means the IRS could deny the entire earned income credit.
If the IRS denies your whole EIC claim:
You must pay back any EIC amount you’ve been paid in error, plus interest.
You might need to file Form 8862, "Information to Claim Earned Income Credit After Disallowance," before you can claim the EIC again.
You could be banned from claiming EITC for the next two years if the IRS finds you filed your return with “reckless or intentional disregard of the rules.”
You could be banned from claiming EITC for the next 10 years if the IRS finds you filed your return fraudulently.
Most tax software walks you through the EITC with a series of interview questions, greatly simplifying the process. (Plus, if you qualify for the EITC, you might be able to get free tax software.) But remember: Even if someone else prepares your return for you, the IRS holds you responsible for all information on any return you submit.