Qualifications for the Indiana Earned Income Tax Credit
Indiana's earned income tax credit (EITC) has been around since 1999, but the state changed it to mirror the terms of the federal credit in 2003. It's a refundable credit intended for low-income working families and individuals, so you'll receive the difference in cash if the amount of your tax credit is more than the taxes you owe.
Earned Income Tax Credit Eligibility
You must be eligible for and claim the federal earned income tax credit on your federal tax return to qualify for Indiana's EITC. Most of the rules for Indiana's credit follow the rules for the federal credit. You must have earned income, either from an employer or from working in your own business, and the income can't be foreign.
You must also have a valid Social Security number and be a U.S. citizen or a resident alien throughout the entire year. A nonresident alien can qualify for the tax credit if they're married to a U.S. citizen or a resident alien, and if the couple files a joint married return.
Filing a separate married return prevents you from claiming the federal EITC. You can't claim the Indiana credit if you're the qualifying child dependent of another taxpayer and someone, such as your parent, claims you as a dependent.
You must be between the ages of 25 and 65 to claim the Indiana EITC if you don't have any dependent children. Otherwise, no age limits apply.
Your federal adjusted gross income (AGI) and your modified adjusted gross income (MAGI) must be less than certain limits to qualify you for Indiana's earned income tax credit. The following thresholds apply as of the 2019 tax year, the return you'll file in 2020:
- $46,700 if you have two qualifying children
- $41,050 if you have one qualifying child
- $15,500 if you have no qualifying children
Rules for Qualifying Children
The first three rules for qualifying children are the same as for the federal EITC. A qualifying child must be younger than age 19 on the last day of the tax year, or age 24 if they're full-time students. They must additionally be younger than you, or younger than both you and your spouse if you're married and you're filing a joint return.
Children who are permanently and totally disabled qualify regardless of age.
Qualifying children must have lived with you for more than half the tax year, but time spent away at college or other temporary absences aren't considered living away from home if the child intends to return to your residence.
A qualifying child must be your child, stepchild, grandchild, or great-grandchild. They may also be your sibling, half-sibling, step-sibling, or a descendant of one of these relatives, such as a niece or nephew. A child who's married cannot have filed a joint return with their spouse unless it was only to claim a tax refund.
A qualifying child cannot also be the qualifying of another taxpayer whose modified AGI is higher than your own.
Special Rules for Foster Children
For purposes of the state EITC, Indiana's definition of a foster child includes your sibling or stepsibling, or a descendant of your sibling or stepsibling, if you cared for the child in your home just as you would your own child. A foster child can also be an unrelated child who was placed with you by a state agency. Foster children must live with you all year rather than just more than half the year.
You might want to check with a tax professional if you're claiming a foster child for purposes of the earned income credit because of these special rules.
The Amount of the Credit
Indiana's credit can't exceed 9% of your federal EITC, and it can be reduced by 9% of any alternative minimum tax you might owe.
How to Claim the Credit
Complete and attach Schedule IN-EIC to your Indiana tax return. A downloadable form is available on the Indiana Department of Revenue website.
NOTE: State and federal laws change frequently, and the above information may not reflect the most recent changes. Income thresholds are current through the 2019 tax year and can be expected to increase somewhat annually. Please consult with an attorney or tax professional for the most up-to-date advice. The information contained in this article is not intended as legal advice and is not a substitute for legal advice.
Tax Credits for Workers and Their Families.org. "Indiana Earned Income Tax Credit (EITC)." Accessed May 17, 2020.
Indiana Department of Revenue. "Earned Income Tax Credit...Do You Qualify?" Accessed May 17, 2020.
Indiana Department of Revenue. "Indiana Earned Income Credit 2019." Page 2. Accessed May 17, 2020.
Indiana Department of Revenue. "Indiana Earned Income Credit 2019." Page 4. Accessed May 17, 2020.
IRS. "Earned Income Tax Credit (EITC), Questions and Answers." Accessed May 17, 2020.
Indiana Department of Revenue. "Indiana Earned Income Credit 2019." Page 5. Accessed May 17, 2020.
Urban Institute.org. "State Earned Income Tax Credits." Accessed May 17, 2020.