The Earned Income Credit is aimed at helping low-wage earners, in particular those with kids.
Primarily it works in two ways: get a tax refund or pay less to the IRS. The amount you get depends on the factors cited below.
Maximum Returns
A majority of the time, the IRS sends out a refund rather than paying lower taxes. The figures may change from year to year. The current ones, however, state the following.
For one child, the highest amount is $2,917. If you have two or more kids, the amount is set at $4,824. The total amount given back by the IRS varies per state.
Qualified Individuals
The Earned Income Credit is open to working people who are raising children. Most of the time parents of children avail of it. But grandparents or any other relatives (or foster father or a mother) are also qualified.
It should be pointed out that the offer is good only for those who file taxes. If you don’t file taxes, you won’t get any even if you’re qualified.
Qualified Children
Sons, daughters, and adopted are qualified provided they stayed at your residence for at least half a year for the past year.
The age limit is for those below 19. The limit is extended up to 24 years if he or she is a student. All ages are allowed for totally handicapped children.
Estimating the Amount
The IRS determines how much you will receive for the Earned Income Credit.
However, the National Tax Coalition can give you some ideas of how much you’ll get. The information they provide is only an estimate, not an exact figure.
Income Limitations
The rates vary. For a single person with one child, the gross income must be under $33,995. For a single parent with two kids or more, the amount is $38,646.
For couples with a single child, the amount is $36,995. This is the combined gross income. For a couple with two or more children, the total should be under $41,646.
Some people without kids can also avail of this IRS incentive. To get the Earned Income Credit, their gross income needs to be below $12,880. For childless married couples, their income must be under $15,880.
Other Information
If the parents are no longer together, only one can get a refund. It is the one whom the child spends more time with. If the time is equal (i.e., six months each) the one with the higher income can claim the son/daughter aid the refund.
If the couple is married, filing jointly is a must.
To avoid confusion it should be stated that this is not an IRS program. There is no need to apply. You just have to file taxes. If you meet the requirements, you’ll get it within 5 to 10 days. This is open to American citizens and immigrants as well.
The Earned Income Credit you get varies. But it can mean a lot in today’s economy. As such, it’s imperative that everyone should take advantage of it.
Becoming aware of how much Earned Income Credit you’re entitled to is essential knowledge for all taxpayers in the US.
Acquire the fundamental facts about Earned Income Credit and get your money minus the hassle.