Is the Earned Income Tax Credit Right for You?
According to the IRS, as of December 2023, approximately 23 million workers and families received a total of $57 billion through the EITC. This tax credit is refundable, meaning you can receive a refund even if you owe no taxes. But you must file a return to claim it — no exceptions. Therefore, the first step is to consult with a CPA or tax preparer to determine your eligibility and help with filing.
To qualify for the EITC, your earned income must fall below specific thresholds. Earned income includes wages from employment, self-employment or gig work (such as ridesharing or online sales). Earned income does not include interest, dividends, pensions, Social Security, unemployment, alimony or child support.
You must also meet the following criteria:
- Have less than $11,600 in investment income
- Have a valid Social Security number
- Be a U.S. citizen or resident alien for the entire year
- Not file Form 2555, Foreign Earned Income
- Meet special rules if you are separated from your spouse and not filing jointly
Understanding the details
In 2024, to qualify for the EITC, your income had to be below these limits:
- Up to $59,899 ($66,819, if married filing jointly) with three or more qualifying children
- Up to $55,768 ($62,688, if married filing jointly) with two children
- Up to $49,084 ($56,004, if married filing jointly) with one child
- Up to $18,591 ($25,511, if married filing jointly) with no children
To be counted for the EITC, a child must:
- Be your child, stepchild, foster child, sibling, stepsibling, half-sibling or a descendant of any of these (e.g., grandchild, niece)
- Be younger than you (or your spouse, if filing jointly) and either:
- Under age 19 at year-end (or under age 24 if a full-time student)
- Any age if permanently disabled
- Have lived with you in the U.S. for more than half the year
Note that you cannot claim the credit for a child who did not live with you for at least half the year, even if you provided financial support. Some exceptions apply (e.g., temporary absence, foster care, adoption, birth, death or kidnapping).
In 2024, the maximum credit available was:
- $7,830 with three or more qualifying children
- $6,960 with two children
- $4,213 with one child
- $632 with no children
Special rules for combat pay
If you receive nontaxable combat pay, you can choose to include it as earned income. This may increase (or decrease) your credit depending on your specific situation.
The EITC can provide a significant financial boost, but filling out the forms, navigating special rules and calculating the credit can be complicated and time-consuming. A CPA or trusted tax preparer from PBG Advisors can help you get it right, avoid errors and claim the full credit you’re eligible for.
Finally, keep in mind that the IRS frequently adjusts these numbers, so make sure you are looking at the right figures for the year that’s applicable to your situation. Work with a professional.
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