Does some of the income you report on your tax return come from employment, or work you perform as a sole proprietor or independent contractor? If your answer is yes, you satisfy one of the requirements for taking the earned income credit.
Video transcript:
Hi, I'm Arye from TurboTax. Wondering if you should file for the earned income tax credit? Ask yourself a few questions.
- One: Does your income meet the IRS threshold for your filing status? You'll need to make sure both your adjusted gross income and your earned income are more than zero, but less than the limits set by the IRS in order to qualify*. There are different thresholds depending on your filing status and how many children you have. You can find out what those limits are on the IRS website, IRS.gov. Search their website for “earned income credit limits.”
- Two: Do you have investment income to report on your tax return? Investment income is any income received from things like stock dividends, bank interest and more. Check the IRS website for limits on investment income as well, in order to claim the Earned Income Credit.
- Three: If you're married, did you file a joint tax return? You will be ineligible if you file separately.
- Four: Are you between 25 and 65 years old?
- Five: It can be easier to qualify for the earned income credit if you can claim a child as a dependent, as your income thresholds increase for each child you claim.
You'll need to fill out a Schedule EIC if you have children and claim the earned income credit. You won't need to calculate your earned income credit on the schedule, just provide information about children like their relationship to you, their birthdays and other things you probably know of off the top of your head.
When you use TurboTax you don't need to know anything about tax forms. We'll ask you simple questions and put your answers in all the right forms for you.
For more information about this and other tax topics, visit TurboTax.com.
*The Consolidated Appropriations Act (CAA) was signed into law on December 27, 2020 as a stimulus measure to provide relief to those affected by the pandemic. For tax year 2020, The CAA allows taxpayers to use their 2019 earned income if it was higher than their 2020 earned income in calculating the Additional Child Tax Credit (ACTC) as well as the Earned Income Credit (EIC).
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