Do I Qualify for Earned Income Tax Credit

Before delving into the concept of earned income tax credit, it may be useful to first define earned income. This is simply money earned from business ventures you may undertake for yourself or as an employee of another.

As a result, it covers the entire range of salaries, revenue, tips, and so on. Unemployment benefits, alimony, child support, and retirement income, on the other hand, do not fall into this category.

After that, how does it relate to the earned income tax credit (EITC)? By the end, you should have a good understanding of what EITC is, how it works, and what qualification requirements may exist.


What Is the Earned Income Tax Credit (EITC)?

Simply put, it is a refundable tax credit that workers in the low-to-moderate income bracket receive on their federal tax returns. If you look at it strictly in terms of scaling, you could say that the less you earn, the larger your tax credit will be.

As you are aware, your tax liability is calculated based on your earnings and can vary from year to year. Tax credits are also calculated and potentially variable during any given federal tax return period. The EITC on your earned income for a given period reduces your tax liability by the amount of the EITC.

Assuming you have no outstanding taxes, the IRS will either make a direct deposit into your bank account or send you a check. Furthermore, if you have not withheld taxes from your earned income, you may even receive cash from the IRS.

How Does the Earned Income Tax Credit Work?


The best way to explain how the earned income tax credit works are to list some of the requirements.

First, in the tax year 2021, if you file as a qualifying widower, head of household, or single, your earned income cannot exceed $51,464, $47,915, $42,158, or $21,430 with three or more qualifying children, two qualifying children, one qualifying child, or no claimed children.

If you are married and file your return jointly, the income allowances for the same categories as above are $57,414, $53,865, $48,108, and $27,380, respectively.

In case you're wondering what qualifies as a child, it can be a biological child, a foster child, a stepchild, or an adopted child. Siblings, half-siblings, and stepsiblings may also qualify depending on the circumstances of the household.

A child who falls into one of these categories must be under the age of 19 at the end of the year. However, there are some exceptions for full-time students, with the age limit reaching as high as 23 years old. If you are filing jointly with your spouse, the child must be younger than both of you.

Even if you do not have any qualifying children, you may still be eligible for the EITC if you meet the income requirements and a few other criteria.

You must have lived in the United States for at least six months, not been a dependent or claimed as a child on another tax return, and be at least 19 years old. However, if you were a student for more than five months of the year, the minimum age increases to 24 years old.

Qualifications for the EITC

Now, it’s onto the qualification segment. Refer to the section about what constitutes earned income above just in case there is any confusion. With that in mind, you must have some form of earned income. Additionally, note the following:
  • Any gains from investments cannot exceed the $10,000 threshold.
  • You must have a valid Social Security Number.
  • For the entire tax year, your citizenship status must have been either that of a resident alien or a U.S. citizen.
  • You cannot be the dependent or qualifying child on another taxpayer’s claim.
  • Finally, you cannot claim foreign earned income exclusion on form 2555.

Final Remarks

One last concern you may have is the amount of the tax credit. Individuals without children can receive up to $1,502 in tax credits for the 2021 tax year. The highest amounts are paid to filers who have three or more children, up to a maximum of $6,728.

All of the other categories mentioned above fall somewhere in the middle of that range. It is important to note that you do not automatically receive the maximum figure specified for your class. It is still determined by your earned income. These figures, however, are intended to be guidelines to indicate what your maximum expectation should be.

There are online calculators that can help you estimate how much your EITC would be.

Tax credits can be difficult to comprehend at times. With the above information, hopefully, there is more clarity regarding the EITC. You should now have a better understanding of what the EITC is, how it works, what kind of payout to expect, and what the qualification process may entail.

Get Your Tax and Accounting Questions Answered by Our CPA Firm in El Paso, TX

If you’re looking for a reputable CPA firm in El Paso, TX consider calling us at Marcus, Fairall, Bristol + Co., PLLC! We’ll answer any and all of your accounting-related questions such as IRS issues. We offer our clients a variety of accounting services such as the following:


Marcus, Fairall, Bristol + Co., PLLC
Full-Service CPA Firm
230 Thunderbird Dr. Ste G
Phone: (915) 775-1040

Location: El Paso, TX, USA

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