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What is the Earned Income Tax Credit (EITC), or EIC?
In 2021, the average amount of Earned Income Tax Credit received per tax return nationwide was nearly $2,400. Imagine not cashing a check for that much! That’s essentially what taxpayers who don’t claim an EITC are doing — not getting all the money they have earned for their hard work.
The EITC, or EIC (Earned Income Credit), is a financial benefit millions of US workers are eligible for, but which 20% don’t claim. Working individuals and families can’t afford to lose out on money that could really help with living expenses. To make sure you get the credit you deserve, we’ve put together answers to common questions to help you understand your eligibility and claim the EITC properly.
What is the Earned Income Tax Credit?
Enacted in 1975, the EITC is the federal government’s largest benefit for workers. It is a refundable tax credit that gives low- to moderate-income working people, particularly those with children, a financial boost. Your EITC depends on the amount you earned (working for an employer or for yourself), your marital status, and the number of qualifying children you have if any.
See our EITC Income Table for income limits and potential credit amounts based on your filing status and number of children. The EITC could reduce any remaining taxes owed to zero and because it is refundable, any money left over becomes a tax refund — for a qualifying family of five, the EITC could be worth up to $6,935.
Do you qualify for the federal EITC?
It’s important to check whether you qualify each year as eligibility can change based on your marital, parental, and financial status. Every year, about one-third of the people who qualify for the EITC didn’t qualify in the previous year. For help determining your eligibility, the IRS offers an interactive EITC Assistant—in English or en Español .
There are more than 20 factors that help determine eligibility, including income and family size, but don’t sweat it! Use the IRS EITC Assistant (above) or see the main rules for EITC eligibility below; for full details, visit the EITC section of IRS.gov or talk to a tax specialist now .
To meet the basic requirements of the EITC you (and your spouse, if married) must:
Have a Social Security number that is valid for employment
File jointly, if married
Not file Form 2555 or 2555-EZ (related to foreign earned income)
Have earned income (including at-home businesses, construction, and farming) and meet the requirements for Adjusted Gross Income and earned income; see our easy-to-read chart
Have $3,600 or less in investment income for the year
Not be the qualifying child of another person
Generally, be a U.S. citizen or resident alien for the entire year (See IRS Publication 519: U.S. Tax Guide for Aliens)
Also, to claim an EITC, you must file a tax return, even if you don’t owe tax or are not required to file for other reasons. If you qualify based on the above list, you’ll need to consider whether you have a “qualifying child ” to claim.
No child to claim?
That simplifies things, but to claim EITC without a qualifying child, you must have lived in the United States for more than half of the tax year and either you (or your spouse if filing a joint return) must be between the ages of 25 and 65.
One or more children you want to claim?
In addition to having a Social Security number that is valid for employment, there are four main considerations for determining whether an individual can be claimed as a qualifying “child” under the EITC:
- Relationship: Is the person your biological, adopted, step, or foster child, or a descendant of any of them such as your grandchild? They could also be your full, half, or step-sibling, or a descendant of any of these, including a niece or nephew
- Age: Was this person under the age of 19 and younger than you (or your spouse if filing jointly) at the end of the filing year? If a full-time student, were they under the age of 24? Or, was the person (of any age) in question permanently and totally disabled at the end of the filing year?
- Residency: Did this person live with you (or your spouse) in the US (50 states plus DC) for more than half of the filing year?
- Joint Return: If the “child” can file jointly with their spouse, did they not have a separate filing requirement and filed the joint return only to claim a refund?
If you can answer yes to each of these, you may have a qualifying child to claim under the EITC.
If more than one person may be able to claim a child, we suggest reading: Can Both Parents Claim a Child as a Dependent?
What about special circumstances?
If you think the EITC isn’t for you due to your military or veteran status, having (or caring for someone with) a disability, or being clergy, you should read about special rules for these and other populations.
What if I didn’t earn enough to need to file?
The EITC can be reason enough to file! If you didn’t make much, you may be eligible for the EITC, so look into it and file even if it’s just to get this credit.
Why stop there?
If you qualify for the Federal EITC, you may also be eligible for a similar credit offered by your state or local government. There are 29 states and several cities that offer an earned income tax credit to their residents.
Be aware: Not all these programs have the same eligibility requirements as the federal program—some aren’t for people without children or have different income ranges, for example—so you may not be eligible, but it is worth checking. Most state programs are refundable credits, like the federal one, meaning that you get money back if your credit(s) outnumber any taxes you owe. While some don’t offer a refund, the credit could still reduce the amount of state or local tax you may be required to pay.
How do I claim the earned income tax credit?
Preparation is key, whether you get free help, do it yourself, or pay someone to help you file. There are several documents you will need, including:
Social Security cards, verification letters, or other US government documentation for each person on your return
Dates of birth for everyone
Income statements including W-2 forms, 1099s, Social Security, unemployment, pensions, interest, personal business records, etc.
Any documents showing taxes withheld
Copies of the previous year’s federal and state returns (if possible)
Records of expenses, such as tuition, mortgage interest, real estate taxes, business expenses, etc.
All information reporting forms received, including 1095-A, 1095-B or 1095-C
Bank routing numbers and account numbers for direct deposits or payments
Names, addresses, and Social Security numbers or tax identification numbers of anyone paid for childcare
The Schedule EIC listing qualifying children and the Form 1040, US Individual Income Tax Return
If someone will assist you, bring your driver’s license or another government-issued photo ID (and your spouse with theirs for Married, Filing Jointly)
Think carefully about who will help you prepare your tax return. Without professional assistance, you are solely responsible for the information on your return—and mistakes could cost you. Not only could you lose out on the current year’s EITC, but if you make a mistake (or claim something falsely), you could be unable to claim any EITC for two to 10 years. Here are some common EITC errors you should try to avoid.
In short, don’t miss out
Though one in five workers qualify for the EITC, they don’t all know it, or how to claim it. Let the EITC work for you! Jackson Hewitt would also like to work for you—get answers to your questions now.
About the Author
Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.
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