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Meet the Earned Income Tax Credit

Contents

    The Earned Income Tax Credit (EITC) is a refundable income tax credit. Refundable tax credits reduce the amount of income taxes you owe. If you qualify for one like the EITC, it could result in a refund.

    There is a federal EITC and a state EITC. If you qualify for the federal EITC, you automatically qualify for the state EITC. Michigan’s EITC for the 2015 tax year is six percent of the federal EITC.

    Qualifying for EITC

    You must qualify to get the EITC. If you are married, you and your spouse must both qualify. To qualify, you must:

    • Have a valid Social Security number
    • Have earned income
    • Not have earned more income than the limits
    • File jointly if you are married
    • Be a U.S. citizen or resident
    • Have a qualifying child or qualify without one
    • Not be a qualifying child

    Earned Income

    To get the EITC, you must have earned income within the guidelines. Earned income is the taxable money you get from working or from some disability insurance. For the EITC, it includes:

    • Wages, salaries, tips, and other taxable employee pay
    • Union strike benefits
    • Long-term disability benefits received before minimum retirement age
    • Net earnings from self-employment if:
    • You own or operate a business or a farm; or
    • You are a minister or member of a religious order; or
    • You are a statutory employee. You are a statutory employee if you receive a Form W-2 on which the “Statutory employee” box (box 13) is checked.
    • Pay received for work while an inmate in a jail or prison
    • Interest and dividends
    • Retirement income
    • Social security
    • Unemployment benefits
    • Alimony
    • Child support

    Limits on how much you can earn

    • $47,747.00 ($53,267.00 if married filing jointly) with three or more qualifying children
    • $44,454.00 ($49,974.00 if married filing jointly) with two qualifying children
    • $39,131.00 ($44,651.00 if married filing jointly) with one qualifying child
    • $14,820.00 ($20,330.00 if married filing jointly) with no qualifying children

    You also cannot get it if you have more than $3,400.00 in investment income for the 2015 tax year.

    U.S. citizen or resident

    To get the EITC, you must be a U.S. citizen or resident all year or a nonresident married to a U.S. citizen or resident choosing to file a joint return and be treated as a resident. 

    You also cannot file Form 2555 or Form 2555-EZ. These forms are used if you live and work abroad to exclude all or part of your foreign salary or wages from your income when filing your U.S. federal tax return.

    Qualifying Child

    To be a qualifying child, your child must have a valid social security number and pass four tests: relationship, age, residency, and joint return.

    A child can only be claimed by one person or a married couple filing jointly. If more than one person can claim a qualified child and one of those people is the child’s parent, the non-parent can only claim the child if his or her adjusted gross income (AGI) is higher than the parent’s.

    Relationship

    A qualifying child can be your:

    • Legal child (natural born or adopted son or daughter)
    • Stepchild
    • Foster child
    • Brother, half-brother, step-brother
    • Sister, half-sister, step-sister
    • The descendant of any of the above

    Age

    At the end of the tax year, the qualifying child must be younger than you or your spouse (if filing jointly), and be one of the following:

    • younger than 19 years old
    • a full-time student who’s younger than 24 years old
    • a permanently and totally disabled child of any age 

    To qualify as disabled, the child's physical or mental condition must make it impossible for the child to do any substantial gainful activity. A doctor must determine the condition has lasted or is expected to last at least one year or lead to death.

    Residency

    The child must live more than half the year in the U.S. with you or your spouse if you are filing jointly.

    Joint return

    The child cannot file a joint return with the child's spouse for the year, unless it is to claim a refund and there is no separate filing requirement.

    Qualifying Without a Child

    If you do not have a qualifying child, to qualify for EITC:

    • You and your spouse (if you’re filing a joint return) must have lived in the United States for more than half the tax year;
    • Either you or your spouse (if filing a joint return) must be at least age 25 but under age 65; and
    • Neither you nor your spouse (if you’re filing a joint return) can qualify as a dependent of another person.

    The Maximum Credit

    How much you get for the EITC varies depending on your income. For 2015 taxes, the maximum credit is:

    • $6,242.00 with three or more qualifying children
    • $5,548.00 with two qualifying children
    • $3,359.00 with one qualifying child
    • $503.00 with no qualifying children

    The Michigan EITC

    If you qualify for the federal EITC, you also qualify for Michigan’s EITC, which is six percent of the federal credit. You will get a credit if you apply for it on your state tax return.

    How to get the EITC

    To get the EITC, you must file a tax return. Even if you do not owe any tax or are not required to file because you had too little income, you must still file a tax return to get the EITC. A program called Volunteer Income Tax Assistance (VITA) helps many people file their taxes for free.

    Volunteer Income Tax Assistance (VITA)

    Volunteer Income Tax Assistance (VITA) is a program that does people's taxes for free. To qualify, your income must be roughly $54,000.00 or less. If you qualify, an IRS-certified volunteer will do your taxes for free. VITA volunteers can tell you about special tax credits you may qualify for, such as the EITC, Child Tax Credit, and Credit for the Elderly or the Disabled.

    Use the VITA site locator to find a site near you. Check with your local VITA site for dates and times you can get help with your taxes, or call 2-1-1. Call 888-636-4211 if your area doesn’t have 2-1-1. The IRS also offers links to sites that provide free filing services at irs.gov.

    The IRS also gives links to online software you can use to prepare and file your own federal tax return. If your income is less than $62,000.00, you can use free software available at IRS Free File to prepare your federal and possibly your state tax returns.

    To Learn More

    Using the IRS's online EITC Assistant web tool you can find out if you are eligible for the EITC. All you wil need to do is answer a few questions and provide basic income information. To use the tool, visit EITC Assistant.