TurboTax is up-to-date for your 2017 taxes, start now!

Learn more about Tax Reform here tax reform information.

  1. TurboTax /
  2. Tax Calculators & Tips /
  3. Tax Tips Guides & Videos /
  4. Tax Deductions and Credits /
  5. Do I Qualify for Earned Income Credit While on Unemployment?

Do I Qualify for Earned Income Credit While on Unemployment?

Updated for Tax Year 2017


OVERVIEW

Receiving unemployment benefits doesn't mean you're automatically ineligible for the credit but there are other requirements you'll also need to satisfy to claim the EIC.


As the name implies, to be eligible for the Earned Income Credit you must “earn” income by providing services, such as through employment. However, receiving unemployment benefits doesn’t mean you’re automatically ineligible for the credit but there are other requirements you’ll also need to satisfy to claim the EIC. If you do, the credit can reduce your taxes, or even create a refund.

Unemployment compensation

The IRS defines “earned income” as the compensation you receive from employment and self-employment. Specifically excluded from this definition is any unemployment compensation you receive from your state. However, as long as you worked or were otherwise self-employed during the same year you started receiving unemployment checks, you may still be eligible to claim the Earned Income Credit.

AGI limitations

The Earned Income Credit is only available if your adjusted gross income, or AGI, is less than the applicable maximum for the tax year. The applicable maximum AGI depends on your filing status and the number of qualifying children. The applicable maximum AGI increases for each qualifying child. It is also higher for married taxpayers than for single ones. However, if you file your return using the married filing separately filing status, you’re automatically ineligible for the credit.

Your AGI, which you can find on the first page of your tax return, is equal to your total income subject to the income tax, minus the deductions the IRS refers to as “adjustments to income.” In order to be eligible for the credit, BOTH your “Earned Income” (which we discussed above) AND your AGI must be below the applicable limit. It is possible for your earned income to be below the threshold but for the AGI to be above the threshold because of the addition of unemployment compensation to AGI. This would make you ineligible for the Earned Income Credit.

To find the AGI thresholds for your specific situation, see: IRS Publication 596. If you use TurboTax to prepare your taxes, we’ll ask simple questions, do all the calculations and tell you whether or not you’re eligible for the credit.

Citizen or resident

You will not be eligible for the Earned Income Credit if you or your spouse (if filing jointly) was a nonresident alien at any time during the tax year.

If you don’t have United States citizenship, you must either have a green card that allows you to reside in the country, or satisfy the IRS substantial presence test. The test requires you to be physically present in the U.S. for a certain number of days. You also have to have a valid Social Security card that does not include the phrase “not valid for employment.”

If you’re a U.S. citizen or resident who lives abroad, claiming the foreign earned income exclusion on Form 2555 or 2555-EZ will render you ineligible for the tax credit.

Maximum investment income

Eligibility for the Earned Income Credit also requires that your investment income for the 2017 tax year not exceed $3,450. Your investment income never includes the money you earn in your profession and it does not include unemployment compensation. It does, however, include any capital gains you got from investments such as stocks and bonds, interest from a bank account, and dividends.

Again, when you use TurboTax to prepare your taxes, we’ll ask straightforward, easy-to-answer questions about your income and life, and do all the work to determine whether you qualify for the EIC or other deductions and credits.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $59.99$39.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Absolute Zero $0 federal (forms 1040EZ/1040A) + $0 state limited time offer only available with TurboTax Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed: To receive your complimentary subscription to QuickBooks Self-Employed through 4/30/19, you must pay for your 2017 TurboTax Self-Employed return by 4/17/18 and sign-in and access your QuickBooks Self-Employed account via mobile app or at https://selfemployed.intuit.com/turbotax at least twice by 7/15/18. You will have the option of renewing your QuickBooks Self-Employed subscription by 4/30/19 for another year at the then-current subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section. See QuickBooks.com for price comparison. Offer not valid for existing QuickBooks Self-Employed subscribers already on a payment plan.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15%) for tax year 2017. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Help and Support: Access to a TurboTax specialist is included with TurboTax Deluxe, Premier, Self-Employed and TurboTax Live; not included with Free Edition (but is available as an upgrade). TurboTax specialists are available to provide general customer help and support using the TurboTax product. SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Advice, Expert Review and TurboTax Live: Access to tax advice and Expert Review (the ability to have a Tax Expert review and/or sign your tax return) is included with TurboTax Live or as an upgrade from another version, and available through October 15, 2018. These services are provided only by credentialed CPAs, EAs or tax attorneys. State tax advice is free. Some tax topics or situations may not be included as part of this service, which shall be determined in the tax expert’s sole discretion. In the event your return is reviewed by a tax expert and requires a significant level of tax advice or actual preparation, the tax expert may be required to sign your return as the preparer at which point they will assume primary responsibility for the preparation of your return. Expert Review [and TurboTax Live] not available on the TurboTax mobile app or when using a web browser on your mobile phone. On-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access and My Docs features: Included with TurboTax Deluxe, Premier, Self-Employed, TurboTax Live or with PLUS benefits. Access to all tax-related documents we have on file for you is available through 10/31/2019. Terms and conditions may vary and are subject to change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com March 13, 2017.
  • Get tips based on your tax and credit data to help get you to where you want to be: Tax and credit data accessed upon your consent.
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Data Import: Imports financial data from participating companies; may require a free Intuit online account. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2016 and higher) and QuickBooks Desktop (2012 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.