The Earned Income Tax Credit for Tax Year 2019
A Tax Refund for Low-Income Workers
The federal government created the earned income tax credit (EITC) in 1975 to help low-income taxpayers keep more of their hard-earned money. The credit was intended to be just a temporary legislative provision at first, but it's still around all these years later. The EITC is a refundable credit, so the IRS will send you a refund for the difference if there's any left over after it erases your tax debt.
The amount of the credit depends on your income, how many dependents you have, and a few other rules.
How Much Is the EITC?
The maximum tax credits for the return you'll file in 2020 for the 2019 tax year are:
- $6,557 if you have three or more qualifying children
- $5,828 if you have two children
- $3,526 if you have one child
- $529 if you have no children
These maximum credit amounts increase annually to keep pace with inflation. They're set at $6,660, $5,920, $3,584, and $538 respectively for the 2020 tax year, the return you'll file in 2021.
Keep in mind that these are maximum amounts. The EITC is calculated by a percentage of income called the "credit rate," and taxpayers with the least income and the biggest families receive a larger credit.
The EITC phases out entirely—it's not available at all—for those with incomes over certain limits based on filing status. You must have earned income to qualify for the credit, but you can't have too much.
Earned income means wages and earnings from employment and net profits from self-employment.
Wages and salaries are reported on Form W-2. Self-employment income is generally reported on Form 1099-MISC.
Both your earned income and your adjusted gross income (AGI) must be less than a certain threshold to qualify for the EITC. Your AGI is your earned income minus certain adjustments for income that you don't have to pay taxes on, such as IRA contributions. It appears on line 8b of the 2019 Form 1040.
In 2019, your earned income and AGI must have been less than these amounts if you use the single, head of household, or qualifying widower filing status:
- $50,162 if you have three or more qualifying children
- $46,703 if you have two children
- $41,094 if you have one child
- $15,570 if you have no children
Income limits increase for married taxpayers who file joint returns:
- $55,592 if you have three or more qualifying children
- $52,493 if you have two children
- $46,884 if you have one child
- $21,360 if you have no children
Investment Income Limitations
Investment income can't exceed $3,600 as of tax year 2019. This includes interest, dividends, capital gains, and royalties. It might be reported on a 1099-MISC or, for dividends, on Form 1099-DIV. The institutions where you hold investments or accounts should send you copies of these forms shortly after the first of the year.
Other EITC Requirements
In addition to income restrictions, taxpayers must meet a few other rules to be eligible to claim the EITC:
- You must have a valid Social Security number.
- You must be a U.S. citizen or a resident alien for the entire year.
- You—and your spouse if you're married—can't be claimed as a qualifying child by anyone else.
- You can't claim the foreign earned income exclusion, which relates to wages earned while living abroad.
Additional rules apply if you don't have a qualifying child:
- You and your spouse, if you file jointly, must be between the ages of 25 and 64, and
- You must have lived in the U.S. for more than half the year.
Finally, you can't claim the EITC if your filing status is married filing separately, but if you and your spouse are separated and your spouse didn't live with you at any time during the last six months of the tax year, you might be able to file as head of household. This status would allow you to claim the earned income tax credit.
Rules for a Qualifying Child
The rules for qualifying children for the EITC are slightly different than those for dependents in general. You might be able to claim a child as your dependent for other tax perks but not for the EITC, or you might qualify for the EITC even though their noncustodial parent claims your child as a dependent.
The rules for qualifying children for EITC purposes are based on four tests:
- The relationship test: The child must be related to you by birth, marriage, adoption, or live with you under a foster arrangement. The child can be your son, daughter, stepchild, grandchild, niece, nephew, brother, sister, or an eligible foster child. Adopted children are treated the same as children by birth. Foster children must be placed in your care by an authorized placement agency.
- The age test: The child must be age 18 or younger at the end of the tax year, or age 24 or younger and a full-time student for at least five months of the year. If your dependent is totally and permanently disabled, you can claim the person for the EITC regardless of age. In any case, you—or your spouse if you're married and filing a joint return—must be older than your dependent.
- The residency test: The child must live with you in the U.S. for more than half the year—at least six months and one day.
- The joint return test: A child you claim as a dependent for purposes of claiming the EITC cannot file a joint return with their spouse. One exception is if your dependent files a joint return solely to claim a refund and they don't claim any deductions or tax credits on their own return.
Children Need Social Security Numbers
The child must also have a valid Social Security number issued before the date of your tax return, including any extensions to file that you request.
Complete Form SS-5 if your child needs one and submit the form to the Social Security Administration. You must provide two documents that prove your child's age, citizenship status, and identity, and you'll need ID proving your own identity as well. The SSA provides a list of acceptable documents.
You should receive a Social Security card for the child within a couple of weeks if your request is approved.
Consider asking the IRS for an extension of time to file if the tax deadline is looming and you don't yet have your child's Social Security Number. It's a simple matter of filing Form 4868 on or before Tax Day, and you'll have until Oct. 15 to file your return.
Refunds Are Delayed
You'll have to wait a little while for your EITC refund, even if a portion of your expected refund is for taxes you overpaid during the year. The Protecting Americans from Tax Hikes (PATH) Act requires that the IRS must hold refunds that claim this credit until at least Feb. 15. This allows the government some time to investigate the possibility of fraudulent claims.
A delayed refund doesn't mean the IRS suspects you of fraud. The rule applies to all tax returns claiming the EITC.
Claiming the EITC
You must attach Schedule EIC to your Form 1040 to claim a qualifying child or children for purposes of the earned income tax credit. You won't want to file without claiming the EITC if you qualify for it because it's a valuable tax credit that can make a big difference in what you owe the IRS or in the amount that you'll be refunded.
Internal Revenue Service. "Earned Income Tax Credit Income Limits and Maximum Credit Amounts." Accessed Jan. 9, 2020.
Congressional Research Service. "The Earned Income Tax Credit (EITC): An Overview," Page 2. Accessed Jan. 10, 2020.
Internal Revenue Service. "Form 1040 U.S. Individual Income Tax Return 2019." Accessed Jan. 9, 2020.
Internal Revenue Service. "Publication 5334." Accessed Jan. 9, 2020.
Internal Revenue Service. "Do I Qualify for the EITC?" Accessed Jan. 9, 2020.
Internal Revenue Service. "Qualifying Child Rules." Accessed Jan. 9, 2020.
Social Security Administration. "Social Security Numbers for Children," Pages 3 and 4. Accessed Jan. 9, 2020.
Internal Revenue Service. "PATH Act Tax Related Provisions." Accessed Jan. 9, 2020.