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 Credit (EIC) in 2021 because the income levels at which the credit completely phases out have been increased:
- $27,380 for married couples with no kids, and
- $48,108 for married couples with one qualifying child,
- $53,865 for married with two qualifying children, and
- $57,414 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 2021.
- Families with three or more qualifying children can qualify for a bigger tax credit. For 2021, those families can get a maximum credit of $6,728.
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 2021 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
- for 2021, not receive more than $10,000 in investment income such as interest or dividends from rentals, royalties or stock and other assets during the year
For the 2021 tax year, taxpayers can use their 2019 or 2021 earned income based on which one provides the largest credit.
For the 2020 tax year, taxpayers can 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).
When you want to do your own taxes, it’s quick and easy with TurboTax. We'll get you your max refund with step-by-step guidance and 100% accurate calculations—guaranteed.