The Earned Income Tax Credit is basically a refundable income tax credit for taxpayers. The motive behind this credit is to help low-moderate-income working people. This is formally called EITC, and this year several changes have taken place by irs.gov. due to Covid 19 effect on income. Those who meet the eligibility criteria can claim earned income tax credit in the 2022 Tax Refund.
Earned Income Tax Credit
The Earned income tax credit is a wide part of tax law affecting low to moderate-income workers. Per the rules, $50 is distributed to these taxpayers annually. The Earned income tax Credit was enacted in the year of 1975. The main motive behind this act was to help low to moderate workers and their families. They get a tax break with this act and rule.
Although this is not for everyone, there are certain criteria, and those who meet this eligibility criterion can claim for Earned Income Tax Credit. EITC also covers children of low to moderate-income families. The basic rules are applicable to make it more effective and bifacial for taxpayers.
|
Name |
Earned Income Tax Credit |
|
Authority |
Internal Revenue Service |
|
Year |
2022-23 |
|
Official website |
Irs.gov |
EITC Basic Qualifying Rules
We discussed shortly that there are some basic rules for the eligibility of an EITC claim. There are certain rules decided by gov and Earned Income Tax Credit irs.gov so that those who need a tax break can take advantage of this facility. A taxpayer can claim with or without a child the basic rules for qualifying for EITC rules are:
- Taxpayers have worked on earned income under $59187.
- Taxpayers should have an investment income below $10,300 in the year 2022.
- Taxpayers must have a social security number. They must have this number by 2022 or the date of extension.
- Taxpayers should be valid US citizens or Us aliens throughout the year.
- Not file form 2555 in case of Foreign Earned Income.
- Apart from these basic rules, there are special rules for Military, Clergy members and taxpayers with disabled relatives.
What are EITC income limits?
Earned Income Tax Credit has also set certain income limits that depend on your filing status and the number of qualifying children. Qualifying children must have spent sufficient time with taxpayers at least more than half the year. There is no hard rule that a child must be your biological child. A child could be your stepchild, nephew, Foster child, adopted child, sibling or descendant child.
In case your earned income is higher than $3,650 from investment, this means that you are not eligible for EITC. Earned income should have included all your rentals, stock dividends and inheritance.
What is the EITC Claim maximum amount?
Simply put, the size of your tax credit equally depends on your family and dependents. The maximum EITC you can receive in the year of 2020 tax year.
$6,660 if the taxpayer has three or more qualifying children, the amount will be $5,920 in case of two qualifying children. Those taxpayers with no qualifying children or several qualifying children are 0 will get $538 as the claim amount. The amount of $3,584 is allowed to taxpayers with one qualifying child.
How does Earned Income Tax Credit Work?
Earned income tax credit or EITC’s first step is to check first the taxpayer is eligible or not. All those who are not eligible or meet any qualification parameter can not claim for Earned Income Tax Credit. Taxpayers can apply for the credit directly towards their tax bill. Taxpayers who owe the US gov $2300 in taxes for respective years. The EITC can be availed as refunded money as a tax credit, so you have to claim and file all the information carefully, and it should not be fake.
EITC for Single Tax Payers
Single taxpayers are those with no qualifying Child or the number of qualifying children is 0. There are certain rules for these taxpayers to claim the EITC. The age of taxpayers should be more than 25 and less than 65. Those who are below 24 and more than 5 years can not claim this tax credit. Apart from that, a citizen who has not been living in the United States for more than half a year and is a single taxpayer is also not eligible for EITC. The most important rule for being a single taxpayer eligible for EITC is that they should not depend on any other taxpayer.
Earned Income Tax Credit is a valuable initiative of IRC to provide a tax break and relief to low to moderate families. We have mentioned the important criteria and eligibility for this tax credit; in case you meet all the parameters decided by IRS, you can claim for Earned Income Tax credit and get relief.
Click to know More Finance Updates.