Earned Income Tax Credit: All you need to know about claiming it!

The Earned Income Tax Credit (EITC) is a refundable income tax credit designed to assist low to moderate-income working individuals and families. Officially known as EITC, this credit underwent several changes by the irs.gov due to the impact of Covid-19 on people’s income. If you meet the eligibility criteria, you can claim the Earned Income Tax Credit when filing your 2022 Tax Refund. Check More on Sarkari Result

Introduction to Earned Income Tax Credit

The Earned Income Tax Credit is a significant aspect of the tax law aimed at benefiting low to moderate-income workers. These taxpayers can receive an annual credit of $50 as per the regulations. Enacted in 1975, the primary objective behind this credit was to provide financial support to low to moderate-income workers and their families, offering them a tax break through this legislation.

Eligibility Criteria for EITC

The Earned Income Tax Credit is not available to everyone; there are specific eligibility criteria established by the government and irs.gov to ensure that those in need of a tax break can benefit from this program. To qualify for EITC, taxpayers must meet the following basic rules:

1.Earned income should be below $59,187.

2.Investment income should be below $10,300 in the year 2022.

3.Taxpayers must have a valid social security number, acquired by 2022 or the extension date.

4.Taxpayers should be either valid US citizens or US aliens throughout the year.

5.Taxpayers must not file Form 2555 for Foreign Earned Income.

Additionally, there are special rules for military personnel, clergy members, and taxpayers with disabled relatives.

EITC Income Limits

The Earned Income Tax Credit has set income limits based on the filing status and the number of qualifying children. The qualifying children should have spent more than half the year with the taxpayer. It is not necessary for a qualifying child to be the taxpayer’s biological child; it could be a stepchild, nephew, foster child, adopted child, sibling, or descendant child.

Taxpayers with earned income higher than $3,650 from investments are not eligible for EITC. Earned income includes all rentals, stock dividends, and inheritance.

Maximum EITC Amount

The amount of EITC a taxpayer can receive depends on their family size and the number of dependents. For the tax year 2020:

$6,660 for taxpayers with three or more qualifying children.

$5,920 for taxpayers with two qualifying children.

$3,584 for taxpayers with one qualifying child.

$538 for taxpayers with no qualifying children.

How EITC Works

To claim the Earned Income Tax Credit, taxpayers must first check if they are eligible. Those who do not meet the qualification parameters cannot claim the credit. The EITC can be applied directly towards the tax bill, and any amount left can be received as a tax credit refund. Taxpayers must provide accurate information when claiming the credit.

EITC for Single Taxpayers

For single taxpayers with no qualifying children or those with a total of zero qualifying children, specific rules apply to claim the EITC. The taxpayer must be between the ages of 25 and 65 to qualify. Taxpayers below 24 or above 65 years of age cannot claim the tax credit. Additionally, single taxpayers who have not resided in the United States for more than half a year and those who depend on another taxpayer are not eligible for EITC.

Conclusion

The Earned Income Tax Credit is a valuable initiative by the Internal Revenue Code to provide tax relief to low to moderate-income families. By meeting the established criteria and eligibility requirements for this credit, eligible individuals and families can claim the Earned Income Tax Credit and receive the much-needed financial support.