The 2014 Earned Income Tax Credit, or EITC (also know as EIC), is a credit designed for lower income working individuals and families.
It is intended as an additional reward for working, thus the words “earned income.”
If you don’t have children, you must earn a relatively low income to qualify for the EITC.
For 2014, you must earn less than $14,590 to receive the EITC ($20,020 married filing jointly) if you have no qualifying children.
It’s easier to qualify for the EITC if you have one or more children.
For example, if you have three or more children and are married for 2014, you may qualify for the EITC if you make less than $52,427.
How does the Earned Income Tax Credit work?
The EITC is based on the amount of income your household earns.
If you receive the credit, you can get cash back as a refund, even if you didn’t pay estimated taxes or have income tax withheld from your pay.
However, you must file a tax return to get this credit, even if you wouldn’t otherwise be required to file.
The maximum credit amounts for 2014 are:
- $6,143 with three or more qualifying children
- $5,460 with two qualifying children
- $3,305 with one qualifying child
- $496 with no qualifying children
In the lower income levels, the more you earn, the more EITC you receive.
After a certain point, depending on how many children live with you and whether you are married, your credit amount declines until it is zero.
Can I claim the credit?
For 2014, you may qualify for the EITC if all of the following are true:
- You, your spouse if you are married, and your children have Social Security numbers.
- You earn income working for yourself or as an employee.
- You do not use the Married Filing Separately filing status.
- You are a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
- Someone else cannot claim you as a qualifying child for the EITC.
- You do not have foreign earned income for which you file Form 2555 or Form 2555-EZ.
- You do not have more than $3,350 in interest, dividends, or other investment income.
- You are at least age 25 but under age 65 at the end of the year, you live in the U.S. for more than half the year, and you do not qualify as a dependent of another person. These requirements do not apply if you have at least one qualifying child.
- Your earned income and adjusted gross income are under these limits:
|Number of Children Living with You||Maximum Adjusted Gross Income and Earned Income|
|0||$14,590 ($20,020 married filing jointly)|
|1||$38,511 ($43,941 married filing jointly)|
|2||$43,756 ($49,186 married filing jointly)|
|3 or more||$46,997 ($52,427 if married filing jointly)|
What if I receive combat pay in the military?
If you receive combat pay, special rules apply. You can choose whether or not to include combat pay in your earned income.
Ordinarily, you are not required to include combat pay in your earned income.
If you qualify for the EITC, however, excluding combat pay from income may reduce the amount of EITC for which you qualify.
You may actually be better off counting the combat pay as earned income.
You must include all your combat pay or none in your earned income.
Which children can I claim for the EITC?
The number of children you claim for the credit is very important for making sure you take your maximum credit.
The number of children you claim as dependents is not always the same number of children who qualify you for the EITC.
A child for the EITC must live with you for more than half of the year, regardless of who provides support for the child or takes the dependency exemption.
The noncustodial parent can never claim a child for purposes of the EITC.
Each qualifying child for the EITC must meet all four of these tests:
- Age. The child must be under age 19 at the end of the year, or be a full-time student under age 24. If the child is permanently and totally disabled, he or she can be any age. Your child for the EITC must also be younger than both you and your spouse.
- Relationship. A “child” for the EITC can be your son, daughter, stepchild, brother, sister, half-sibling, step-sibling, foster child, adopted child or a descendent of any of these.
- Residency. The child must have lived with you in the U.S. for more than half the year. If you file a joint return, include time lived with your spouse.
- Joint return. The child must not have filed a joint return with his or her spouse, unless it was only filed to claim a refund and he or she was not required to file a return.