Earned Income Credit (EIC): Meet the IRS Version of Welfare

The government has various ways on how to take care of the unfortunate ones. Different agencies, at the state, county or federal levels have different programs to help the poor. Among the government programs that are popular are free medical cost, housing assistance, cash aid, food stamp, WIC, etc. but your income must be at the poverty level for you to receive this. So pretty much, it may discourage other people from working since they know that any increase in salary would mean reduce benefits.

The earned income is quite the opposite. You can only take advantage of this if you work or have a compensation. The income limits is quite higher than the income limitations for most of the welfare program.  The credit is refundable, meaning that you can still take the credit even if you do not owe any taxes. For you to qualify, you (and your qualifying dependent if you have any) must have a valid social security number, must be a US Citizens or a resident alien all year, must not file married filing separate and must have investment income of $3,100 or less. While this credit provides more refunds for those people who have qualifying dependents, you can still claim the credit even if you don’t have one if you meet the income requirement.

Income Limitations

The income limitation varies depending on your filing status and how many dependents you have. For example, you can avail the credit if your adjusted gross income (AGI) is less than:

  • $43,352 and you are filing single or head of household ($48,363 for married filing joint) and have 3 or more qualifying dependent
  • $40,363 and you are filing single or head of household ($45,373 for married filing joint) and have 2 or more qualifying dependent
  • $35,535 and you are filing single or head of household ($40,545 for married filing joint) and have one qualifying dependent
  • $13,460 and you are filing single or head of household ($18,470 for married filing joint) and have no qualifying dependent.

Figuring Your Credit

For tax year 2010, you can figure out your credit using this 2010 Earned Income Credit table.

For single or head of household filers or qualifying widower, you can receive a MAXIMUM CREDIT of:

  • $457  IF your AGI is between $6,000 and $7,500 AND you have no qualifying dependent
  • $3,050  IF your AGI is between $8,950 and $16,450 AND you have one qualifying dependent
  • $5,036 IF your AGI is between $12,550 and $16,450 AND you have two qualifying dependent
  • $5,666  IF your AGI is between $12,550 and $16,450 AND you have three or more qualifying dependent

For married filing joint, you can receive a MAXIMUM CREDIT of:

  • $457  IF your AGI is between $6,000 and $12,500 AND you have no qualifying dependent
  • $3,050 IF your AGI is between $8,950 and $21,250 AND you have one qualifying dependent
  • $5,036  IF your AGI is between $12,550 and $21,500 AND you have two qualifying dependent
  • $5,666  IF your AGI is between $12,550 and $21,500 AND you have three or more qualifying dependent

Claiming The Credit

You must complete Schedule EIC and attach it to your Form 1040 or 1040A.

Source: Publication 596, Publication 17. Irs.gov

Comments

  1. Hi Ken, I actually received this years ago when I was in graduate school full time. I didn’t have kids but I only worked about 10 hours a week at a low paying job, so I qualified. It was helpful at the time because I was mostly living off my student loans.

    • Ken says:

      I’m glad the EIC has helped you.

  2. Susan says:

    I think single filers with no dependents don’t do the EIC this year – instead they complete a Schedule M – the EIC is for those with children – which is different from previous years. The Schedule M is still to get the earned income credit.