Congress introduced the Earned Income Tax Credit in 1975 as part of the welfare reform movement in the early 1970s. Although the EITC is aimed at getting taxpayers with children out of poverty, single payers also qualify -- albeit at a much lower rate. For single filers, the EITC has a very low income limit and how you receive that income can disqualify you.
You can claim the EITC without children, but the maximum allowance was $457 in 2010. This credit indexes against inflation, so it changes every year. If you expect to qualify for the ETIC in any given tax year, you can request the employer give you an advance on it, according to the IRS.
In 2010, taxpayers with no children had to earn less than $13,460 if single or $18,470 when filing a joint return. No more than $3,100 can come from investment income. To receive the maximum EITC in 2010, you had to make $5,970 after which the credit phases out. You must also be between ages 25 and 65 and not a dependent or a child of someone who could claim you for the EITC to receive the EITC as a single filer. You need to live in the U.S. over 50 percent of the year; this includes time in a homeless shelter and military personnel overseas, but not people in Puerto Rico or U.S. territories.
Calculating the EITC
The IRS will calculate the EITC for you. Put "EIC" on line 64a if you use a 1040, 41a on form 1040A and 9a on 1040EZ. If you have nontaxable combat pay, you can elect to include it in your income to raise your EITC or exclude it to qualify as a single filer without a child.
Twenty-two states and the District of Columbia offer their own Earned Income Tax Credit. Some cities, such as New York, New York and Montgomery County, Maryland have an EITC as well. EITC is a refundable tax, so you can receive money back from the government even if you pay no taxes.
- Tax Policy Center: Earned Income Credit
- Internal Revenue Service: Earned Income Tax Credit (EITC) Questions and Answers
- Internal Revenue Service: EITC Income Limits, Maximum Credit Amounts and Tax Law Updates
- Internal Revenue Service: Publication 596 - Introductory Material
- Internal Revenue Service: Publication 596
- BankRate: Earned income tax credit could pay off
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