Tax Deductions and Credits Earned Income Tax Credit Lifts Millions Out of Poverty: What is it? Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Published Nov 6, 2012 - [Updated Sep 7, 2017] 3 min read With the election day here, refundable tax credits are top of mind for many Americans since they remain a big part of the debate over taxes and the IRS estimated that in 2009 the Earned Income Tax Credit lifted nearly $7 million people out of poverty. For 2009 -2012 the Earned Income Tax Credit was temporarily increased for working families with 3 or more dependents. Micheal Rubin explains what the Earned Income Tax Credit is and why you shouldn’t miss out on the valuable tax credit. Earned Income Tax Credit The Earned Income Tax Credit (EITC) is a crucial tax benefit available for low to moderate income earners. It is also very important to those with larger families and relatively low or moderate incomes. Here are the guidelines for this important tax credit. Income Limits For the 2012 tax year, your earned income, and your adjusted gross income (AGI, the sum total of all of your earnings less certain deductions) must be less than: $45,060 ($50,270 married filing jointly) with three or more qualifying children $41,952 ($47,162 married filing jointly) with two qualifying children $36,920 ($42,130 married filing jointly) with one qualifying child $13,980 ($19,190 married filing jointly) with no qualifying children If you make more than the relevant amount above, you won’t qualify for the EITC. Also, if your investment income (like dividends and interest) exceeds $3,200, you’re not eligible for the EITC. Earned Income Tax Credit Eligibility In addition to earning less than the dollar amounts in the table above, you must have a valid Social Security Number, work for pay, and your filing status cannot be married filing separately in order to qualify for the EITC. There are other requirements including USA citizenship/resident alien status and limitations on investment and foreign income, but those are typically not issues for people eligible for the EITC. Work for Pay Unemployment income doesn’t help you qualify for the Earned Income Tax Credit. Neither does bank interest. In order to receive any money via the EITC, you must work. You can have a traditional job as an employee or you can be your own boss and earn money from self-employment. But one way or another, you’ve got to earn some money in order to qualify for the EITC. Qualifying Children As you can see above, the relevant income limits are much more generous if you take care of at least one qualifying child. Your child qualifies if he or she meets all of the following conditions: Has a valid Social Security Number Is your child (natural, adopted or foster), grandchild, sibling, step-sibling, half-sibling, niece, or nephew Younger than you and younger than 19, unless a student (in which case your child must be less than 24), or totally and permanently disabled (in which case there is no age limit) Lives with you in the United States for more than half of the year The child doesn’t file a joint tax return TurboTax and the EITC Finder will help determine your eligibility for the Earned Income Tax Credit. Maximum Credit for 2012 While the precise amount of your credit will largely be determined by your filing status, number of children, and income, there are maximum payable Earned Income Tax Credit amounts. For 2012, these are as follows: $5,891 with three or more qualifying children $5,236 with two qualifying children $3,169 with one qualifying child $475 with no qualifying children What is a Refundable Tax Credit Note that unlike many other tax credits, the EITC is a refundable tax credit. This means that the EITC can not only eliminate any income tax liability you might have, but if your credit exceeds your tax liability, you can also receive a tax refund for that amount. It is for this reason that the EITC is one of the most important tax considerations. You will be able to file your 2012 taxes soon so don’t miss out on this valuable tax credit. It just might mean an extra $2,000 or more in your pocket. Few other tax maneuvers can earn you that kind of cash! TurboTax ask you the appropriate questions and correctly calculates the Earned Income Tax Credit if you are eligible. Previous Post Can I Claim a Casualty Loss for a Natural Disaster? Next Post Holiday Gift Giving and Tax Deductions Written by More from 3 responses to “Earned Income Tax Credit Lifts Millions Out of Poverty: What is it?” I am on socail security disability seperated from my wife earning 1776 amonth is it posiabile for me to file for tax credit Reply Is a disabled person that is not required to file a tax return for federal or state do they have to report winning a jackpot when you get a 1099-g playing on Indian slot machines? When I worked at a Indian casino people that was not disabled would have a disabled person claim the jackpot because they said since they was disabled they did not have to report the income from what I know of working in casino’s for about 6 years it would end up costing the disabled person all the taxes when the person that was not disabled got their half not having to pay any taxes. Of course if they got caught doing this the jackpot was paid to the person that won the jackpot just curious which one is true?? Reply I have a parttime job and earns just about $2,500 yearly. Is it ok for me to do income tax filing?idabel Reply Leave a ReplyCancel reply Browse Related Articles Tax Planning TurboTax Enables Refund Advance to Taxpayers Investments Tax Benefits of Real Estate Investing Self-Employed Business Tax Checklist: What You’ll Need When Filing Uncategorized What Is Deferred Compensation & How Is It Taxed? Investments How Does an Inherited IRA Work? Work Choosing Your Business Structure: 5 Types of Businesses… Tax Deductions and Credits Are HOA Fees Tax Deductible? What You Need to Know Crypto Understanding Crypto and Capital Gains Work 7 Things You Need to Know About the New Business Report… Work Using Form 8829 to Write-Off Business Use of Your Home
I am on socail security disability seperated from my wife earning 1776 amonth is it posiabile for me to file for tax credit Reply
Is a disabled person that is not required to file a tax return for federal or state do they have to report winning a jackpot when you get a 1099-g playing on Indian slot machines? When I worked at a Indian casino people that was not disabled would have a disabled person claim the jackpot because they said since they was disabled they did not have to report the income from what I know of working in casino’s for about 6 years it would end up costing the disabled person all the taxes when the person that was not disabled got their half not having to pay any taxes. Of course if they got caught doing this the jackpot was paid to the person that won the jackpot just curious which one is true?? Reply
I have a parttime job and earns just about $2,500 yearly. Is it ok for me to do income tax filing?idabel Reply