The Earned Income Tax Credit

Enacted by Congress in 1975, the Earned Income Tax Credit (EITC) is a federal income tax credit for low-income workers who meet certain eligibility requirements. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax, or even get a tax refund. Individuals do not need to have children to claim the EITC.
 
Generally, income and family size determine a taxpayer's eligibility and the EITC amount a taxpayer can receive. The maximum amount of the credit for Tax Year 2009 is $5,657.

General Eligibility Rules for EITC

To qualify for the Earned Income Tax Credit, people must meet certain requirements and file a U.S. Individual Income Tax Return. As described below, some EITC rules apply to everyone. There are also special rules for people who have children and for those who do not.
 
Individuals and families must meet certain general requirements. The taxpayer:

• Must have earned income.
• Have a valid Social Security Number for self, spouse (if married filing jointly) and qualifying child.
• Have Investment income limited to $2,950.
• Filing status cannot be “married filing separately.”
• Must be a U.S. citizen or resident alien all year.
• Cannot be a qualifying child of another person.

Income cannot exceed certain limitations. For Tax Year 2009, adjusted gross income must be less than:

• $43,279 ($48,279 if married filing jointly) with three or more qualifying children.
• $40,295 ($45,295 if married filing jointly) with two or more qualifying children.
• $35,463 ($40,463 if married filing jointly) with one qualifying child.
• $13,440 ($18,440 if married filing jointly) with no qualifying children.

To claim a child, the child must meet three eligibility tests:

• Residency Test — The child must have lived with you in the United States for more than half of 2008.
• Relationship Test — The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them. Your child includes:
  • A foster child who was placed with you by an authorized placement agency, or by judgment, decree, or other order of any court of competent jurisdiction
  • A legally adopted child or a child lawfully placed with you for legal adoption
  • Age test — At the end of 2008, the child must have been under age 19, a full-time student under age 24 or any age if permanently and totally disabled at anytime during 2008.
  The qualifying child cannot be used by more than one person to claim EITC. If a child meets the rules to be a qualifying child of more than one person, only one person can treat that child as a qualifying child and claim EITC.