In order to get the EIC, you are required to make a supporting income. The source of income can be self-employed or freelance work. The EIC plan assists people who are eager to work for their money. With the purpose of obtaining the EIC on your child’s basis, the child should be below 18 years of age, or over 18 years of age with some kind of disabilities that are taken care by a parent. Children will permit you to meet the criteria for the EIC, only if they reside with you for a minimum of six months of the year. All the children getting the EIC should have an appropriate social security number. If a married couple desires to obtain the tax benefits of the EIC, they are required to file their taxes together.
By definition, Earned Income Tax Credit is a kind of credit, and thus not regarded as income by the government. It is a special credit which can assist lower income group workers deduct the same on their annual tax return. In the event, no tax had been withheld or nothing is payable to the IRS, you can still get the credit. If the gross income is greater than the earned income, the calculation of credit is done by adjusting gross income and comparing it to the amount received as wages. The eligibility to income for the credit is decided by the income, family size and marital status. The credit is for full time and part time workers, single and married workers, and at least one eligible child at home. Even childless workers can also achieve the credit.
Under the prevailing laws, the earned income tax credit is exempted. However, there is no federal exemption preserving the EIC advantage for the persons that was proposed to lend a hand. You will be refunded the extra amount, if the credit availed is greater than the tax responsibility.
When qualifying, the credit does not incorporate dividends and interest, social security scheme benefits, annuities, pension benefits, workers compensation, unemployment compensation, child support, and fellowships or scholarships. Some people are scared of EIC gazing at the eligibility requirements. In case, your income is below the specified limit, EIC credit is very helpful for you.
Just the once you have determined and calculated the EITC (Earned Income Tax Credit) eligibility, it is recommended to use the free online EIC Calculator to find out or calculate your tax refund for the existing financial tax year.
Filing Status – Married and Filing together. You can file your tax return together or jointly with your spouse in case you are married. A combined return file is acceptable with death of any of the spouse during the current financial tax year.
Filing as Qualified Widow or Widower – In case your spouse died one year earlier than the tax year, you can easily file your tax return. You are required to make sure that you are the main contributor of at least one child or stepchild.
Filing as Single Only – You can apply this category for tax filing if you are unmarried, legally separated, or divorced as of the ending day of the tax year.
Filing as the Head of Household – In case you are unmarried and paying beyond half of the expenses of your entire family, you can make use of this category for tax filing. If married people are living separately, they can use this category, provided that they are living separately for the last six months of existing tax year and paying beyond half of the expenses of your entire family with a minimum of one dependent child. Married but Filing Separately can file their tax return individually by selecting this category if they wish for.
Number of children qualify for the EIC – You need to include the number of kids in your family who are eligible for the Earned Income Credit (EIC). Some requirements set by IRS must be met to include a child considered as qualified. There are some changes in regulation every year by Federal Tax Authority regarding the requirements of qualifying children. So, you need to be updated about the latest regulations before determining the number of qualifying children.
Income earned – Total amount of your taxable amount including earnings from salaries, wages & any other income as well. Here, you can enter earnings from farms and businesses which are not subject to self-employment taxes. You should not record any non-taxable and penal income in it.
Income earned from Self-employment – Enter the amount of self-employment income which is subject to self-employment taxes. As per EIC, you need to decrease self-employment income by half of your self-employment tax bill.
Income from investments – Enter the amount of your total investments in the form of Capital gains, net income from non-operating activities, taxable interest & Tax-exempt Interest.
Combat pay which is non-taxable – Earned Income Credit (EIC) calculator facilitates you to generate the highest EIC by taking your non-taxable combat pay into consideration or not.
Gross income (adjusted) – It is your adjusted gross income which includes your earned income, interest income dividends and capital gains. Your EIC is the lower of your adjusted gross income & earned income.
Penal, scholarships, and retirement income – Any income from penal, scholarship and retirement income is not eligible for EIC as it reduces your EIC.
Age between 25 and 65 checkbox – To be eligible for EIC, enter your age whether you are in between the ages of 25 and 65 or not. This is applicable for the persons who have no children.
Dependent checkbox – State your condition whether you are dependent or not. If you have a qualified children or your spouse, you can be his or her dependent if he or she pays more than 50% of your living expenses.
Qualified children checkbox – State your condition whether you are a qualifying child of your parents or not. Your EIC claim for yourself depends on it.
United States Resident Checkbox – To receive EIC, you need to stay in the U.S. for six months at least within this current tax period. It is applicable for the person who has no qualifying children.
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