What is the Earned Income Tax Credit, and How Can It Help You?
The Earned Income Tax Credit (EIC) is a tax credit that helps you keep more of what you earned. The credit was initially passed in 1975 to offset the burden of social security taxes and provide incentive for working. How is it calculated, and who qualifies?
To qualify for the EIC, you must meet a list of requirements. Additionally, you must file a tax return. So, if you make under the amount which requires a tax return to be filed, you will not get this money back unless you file a return.
Requirements include: (1) you must have earned income from employment, (2) if you do not have a qualifying child, you must meet additional rules.
If you qualify, your income must then be under a certain amount in order to use the credit. For instance, if you have no children, you must have made under $13,980 last year in order to obtain the credit. If you have children, that number could reach up to $45,060.
If you have the right income and meet these other requirements, then you can qualify for an EIC of somewhere between $475 and $5,891.
It is important to see if you qualify for the EIC, because many people overlook it and do not ever take advantage of a large return. The most valuable thing about the EIC is that it is a credit, not a deduction. While a deduction removes a certain amount of income from taxable income, a credit actually deducts a certain amount from your taxes.