The Earned Income Tax Credit or Earned Income Credit (EITC) is a tax credit that is designed to facilitate moderate or low-income individuals and workers against the tax they pay. The refundable tax credit range for the year 2020 is set from $538 to $6,660. The amount of the earned income tax depends on the number of children a person has. However, people who have no children can also qualify for the refundable income tax credit.
Due to the COVID-19 pandemic, people are in dire need of the support from the US government. Therefore, the Earned Income Tax Credit range has been increased for the current year. The range of the refundable tax credit in 2021 starts from $543 and ends up to $6,728, which is also determined by the number of children and tax filing status of a person.
If you find yourself eligible for EITC, then it is recommended that you claim your refundable tax credit when you file your income tax amount. If you have not claimed your refundable credit tax in the last three years, but you find yourself qualified for it, then you must claim to get your money back.
How earned income tax credit works?
There is so much you need to know about the Earned Income Tax Credit before you actually apply for it. Some of factors you must consider include:
- The range of earned income tax credit starts from $538 to $6,660 for the tax year May 2020 — April 2021, depending on the number of children you have, and your tax filing status
- Different states have implemented some new rules in the wake of the coronavirus. For the tax year 2020, to calculate the amount of refundable tax credit you can use either your 2019 or 2020 income, taking into account whichever is higher to be eligible for EITC. This rule also applies to the child tax credit
- When you want to get help from an attorney for your tax credit, to prepare your tax returns, be sure that you ask your attorney to go through all the tax documents
- For the tax year starting after April 2021, (the returns will be submitted in the next year, 2022), the credit range is $543 to $6,728
- If you have no children, you can also claim the Earned Income Tax Credit
- If you file your tax returns regularly every year, the earned tax credit would not be cut from your refundable tax credit
How would you know if you’re eligible for EITC?
Before you claim your tax credit refunds, you must meet some more requirements to qualify for the Earned Income Tax Credit
- The income you get from your investments should be less than $3,650
- Also, you are not entitled to claim if you’re married, and filing separately
- Other than pensions you must have earned $1 income at least
- You shouldn’t have filed the forms including Foreign Earned Income Exclusion, Form 2555-EZ, Form 2555 for earned income
What benefit would you get if you have children?
If you claim your tax credit for your children, they must meet certain requirements, and clear tests to qualify:
- The child can be your son, daughter, niece, grand-daughter, grand-son, half-brother, half-sister, step-sister, step-brother, or nephew
- The child must be under 19 years of age, or younger than you and your spouse
- The child must be an American citizen and have lived with you for more than one and a half years
- There are no age restrictions for disabled children
- The child’s name and social security number should be the same that appears on his social security card
- If you don’t have a child, then you must belong to the 25-65 age group and must have lived in the United States for more than one and a half years