Earned Income Tax Credit (EITC)

Let’s start by answering the question “What is the Earned Income Tax Credit?” also known as EITC, we’ll use the abbreviation in the rest of this article. The first word on the EITC is earned, which means you must have worked for someone the previous year or owned a business to receive the credit. The credit is for people with low incomes, the credit starts to phase out the more money you earn, not the other way around.

Do you qualify?

The fact that you have worked does not mean that you automatically qualify for these credits, there are guidelines that we must follow. The biggest surprise for this credit is the age range that most people don’t know should be between 25 and 65 years old. You can receive this credit even if you do not have children. You cannot receive this credit for your parents. The following people will qualify you for this credit:

• Siblings: sister, brother, stepbrother, stepsister, half-brother of half-sister

• Children: son, daughter, stepson, adopted child, grandson

• Relatives – Niece, nephew

Your qualifying person must be 19 years old or younger. If they go to school they must be 24 years old or younger, and they can be younger than you or totally disabled at any age.

They must live with you for more than half the year and did not provide more than half of their own support. The qualified person is not required to file a joint return or is filing a joint return to receive a refund for income withheld or estimated tax payments.

Marital status for EITC purposes

Statuses for EITC reporting purposes are: Married Filing Jointly (MFJ), Single, Head of Household (HOH), or Widowed.

How much money can you receive?

The most important part is how much your refund is. The EITC can help reduce the amount you owe in federal and state taxes. Yes, California has an earned income tax credit. If your filing status is Single, MFJ, HOH, or Widowed, your adjusted income must be less than $15,010 with no qualifying children, one qualifying child’s adjusted income must be less than $39,617, two children’s income less than $45,007, income for three or more children must be less than $48,350.

Married filing jointly adjusted income must be less than $20,600 with no children, one child’s adjusted income must be less than $45,207, two children’s adjusted income must be less than $50,597, three or more children’s adjusted income must be less than $53,950. Your investment income cannot be more than $3,450.

The maximum EITC credit without children is $510. Some people might not think that is a lot of money. Helps reduce the amount of money you owe the IRS. This is GREAT considering there was a time when you couldn’t receive this credit without kids. The maximum credit for one child is $3,400, two children $5,616, three children $6,318. The increase from one child to two children is $2,216 while going from two children to three is $702 as you can see that the money decreases when you go from two to three children.

Add the credit to the money withheld from your check each year and you could get a hefty refund.

Bring the following documents to file

If someone else is helping you with your return, take the following documents with you.

• Social Security cards, a Social Security number verification letter, or other verification document from the US government for everyone you can list on the return.

• Birth dates of all the people you can include on the return.

• Copies of last year’s federal and state returns, if you have them.

• All income statements: Forms W-2 and 1099, Social Security, unemployment, and other statements such as pensions, stocks, interest, and any documents that show taxes withheld. If you own or manage a business or farm, collect records of all your income.

• All records of expenses, such as tuition, mortgage interest, or property taxes. If you own or manage a business or farm, keep records of all your expenses.

• All information reporting forms such as the 1095-A, 1095-B, or 1095-C.

• Bank routing numbers and account numbers to directly deposit any refunds.

• Dependent child care information: name and address of paid caregivers and their Social Security number or other tax identification number.

Thank you for taking the time to read the EITC information.