OVERVIEW
Recent changes to the Earned Income Tax Credit (EITC) may put more money in your pocket in 2020 if you are married, or if you have three or more qualifying children.
For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.
Here are the latest changes that might benefit you:
More married couples now qualify for the maximum Earned Income Tax Credit (EITC) in 2020 because the income levels at which the credit completely phases out have been increased:
- $21,710 for married couples with no kids, and
- $47,646 for married couples with one qualifying child,
- $53,330 for married with two qualifying children, and
- $56,844 for married with three or more qualifying children.
Since the squeeze on the size of the Earned Income Credit starts at higher income levels, married recipients will enjoy a slightly increased credit. And because income thresholds are indexed for inflation each year, it’s possible that still more married couples will qualify for the full credit in 2020.
- Families with three or more qualifying children can qualify for a bigger tax credit. For 2020, those families can get a maximum credit of $6,660.
As indexing continues to increase the threshold, families could receive an even larger maximum credit next year.
Get help in advance
When you file your 2020 tax return, TurboTax will decide for you whether you qualify for one of these increases. Keep in mind that the new law doesn’t change the basic rules that limit who can qualify for the Earned Income Credit. For example, to qualify for the credit, you must:
- be a U.S. citizen (and any qualifying children must also be U.S. citizens),
- have earned income, and
- for 2020, not receive more than $3,650 in interest or dividends from rentals, royalties or stock and other assets during the year.
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 Tax Credit (EITC).
Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we've got you covered. Feel confident doing your own taxes.
