TurboTax / Tax Calculators & Tips / All Tax Guides / General Tax Tips / When to Use Schedule EIC: Earned Income Credit

When to Use Schedule EIC: Earned Income Credit

Updated for Tax Year 2014


OVERVIEW

The earned income tax credit, or EITC, is available to taxpayers with low to moderate income. It was created in 1975 to help offset the heavy burden of Social Security taxes and act as an incentive for low-income taxpayers to continue working. You can claim this valuable tax credit if you meet the legal requirements, which are administered by the Internal Revenue Service.


Get every deduction you deserve

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

Start for Free

About the EITC

The EITC is a refundable tax credit, which means that it can be used to reduce your taxable income below zero and generate a tax refund. The maximum amount of EITC allowed and income limitations associated with claiming it are adjusted each year by the IRS based on the cost of living. You must meet certain requirements in order to claim the credit. If you have a qualifying child or children, you claim the EITC by filing Schedule EIC with your tax return.

Determining eligibility

You must meet the following requirements in order to be eligible for the EITC:

  • You need to have a valid Social Security number.
  • You must be a U.S. citizen or a full-year resident alien.
  • You must have earned income (wages, salaries, self-employment income, etc.) and meet the EITC income limits.

You cannot claim the credit if you are married and filing a separate return, file Form 2555 or 2555-EZ, have more than $3,350 of investment income (2014 amount), or if you can be the qualifying child of another person. You may claim the EITC without having a qualifying child and filing Schedule EIC if you are not claimed as a dependent on another person's return, live in the U.S. for more than half the year and are between ages 25 and 65.

Qualifying children

If you are filing Schedule EIC, it is because you are claiming the EITC with one or more qualifying children (maximum of three). In order to be considered a qualifying child, your child must meet the tests for residency, age, joint returns and relationship. The child must:

  • Have lived with you for more than half the year
  • Be under age 19 at the end of the tax year — or 24 if a full-time student — and not have filed a joint return
  • Be your son, daughter, brother, sister, stepbrother, stepsister or a foster child legally placed under your custody.

Only one person can claim a qualifying child. If a child can be the qualifying child for more than one person, the IRS has a tie breaker to determine who claims the child.

Calculating the credit

There are two ways to calculate the amount of your EITC. First, you can calculate the credit yourself using the earned income credit worksheet and earned income credit table found in the 1040 Instruction Booklet. When filing Schedule EIC and claiming the credit with a qualifying child or children, it is very important that you find your credit amount in the appropriate column for your filing status and number of qualifying children on the earned income credit table. Second, you can choose to have the IRS figure your credit amount for you if you do not wish to calculate the credit yourself. You can do this by entering "EIC" on line 64a of Form 1040.

The amount of EITC you qualify for increases with the number of qualifying children (up to three) and with the amount of your earned income up to $52,427 and can result in a credit of up to $6,143 for three children (lesser amounts for one or two children; all amounts are for 2014).

Of course, when you use TurboTax to prepare your taxes, we’ll ask you simple questions in plain English, then handle all the calculations for you. We’ll tell you exactly how much of the EITC you qualify to receive.

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.

* Important Offer Details and Disclosures
  • Try for Free/Pay When You File: TurboTax Online pricing is based on your tax situation and varies by product. Actual prices are determined at the time of print or e-file and are subject to change without notice.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal efile of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Prices subject to change without notice.
  • TurboTax Mobile: Actual prices are determined at the time of print or efile and are subject to change without notice. Come back here before you file to confirm that the price has not changed, especially if it's been a while since you downloaded this app.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app features and content. TurboTax mobile app devices supported include Android 4.1 and above, iOS 8 on iPhone 4s and above, and iPad 2.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $34.99 Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • About our TurboTax Product Experts: Customer service and product support (phone or chat) vary by time of year. Phone support not included with Free Edition.
  • About our credentialed tax experts: Live tax advice service is available for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Click here for full terms and conditions. Not available for TurboTax Business customers.
  • Get up to 10% on top of your federal refund: Amazon.com Gift Card offer is for federal refunds only. Limits apply ($2000 per e-card, maximum $10,000 per customer). Offer available only for TurboTax Online (except Federal Free Edition) or CD/download versions sold and shipped, or downloaded directly from Intuit or Amazon. Except as required by law, Amazon.com Gift Cards cannot be canceled, transferred for value or redeemed for cash.

    Amazon.com is not a sponsor of this promotion. Except as required by law, Amazon.com Gift Cards ('GCs') cannot be transferred for value or redeemed for cash. GCs may be used only for purchases of eligible goods at Amazon.com or certain of its affiliated websites. For complete terms and conditions, see www.amazon.com/gc-legal. GCs are issued by ACI Gift Cards, Inc., a Washington corporation. All Amazon ®, ™ & © are IP of Amazon.com or its affiliates. No expiration date or service fees.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2013 TurboTax products.
  • 4.8 out of 5 stars: Average based on customer ratings on TurboTax.com for TurboTax Online and CD/download products tax year 2014, as of January 2015.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • TurboTax CD/Download priority phone support: Priority phone support for TurboTax CD/Download Premier and Home & Business is accessible exclusively via the TurboTax.com Help Center.
  • Benefit Assist: After you file, TurboTax automatically shows you a full list of government benefits you may qualify for, like Food Stamps or reduced phone & utilities. Plus, we help you apply, saving you time and making it easier than ever to get more money! Estimate based on calculation of Benefit Assist users from tax year 2013 and published reports of average benefit and savings amounts from federal and state programs. Actual amounts and qualifications based on your individual situation; some individuals will not qualify. Feature may not be available for all customers.
  • Simplified State Experience: New, simplified state tax preparation available for most filers.
  • Eligibility for $25 cash back for returning Deluxe customers: Customers who have completed their 2013 taxes in TurboTax Deluxe (CD or download), and have completed their 2014 taxes in either TurboTax Premier or TurboTax Home & Business (CD or download), and apply here before 11:59PM PDT April 20, 2015, are eligible for $25 back. 2014 TurboTax Advantage users are ineligible for this offer. Terms and conditions are subject to change without notice.
  • $0 Upgrade Offer: Valid for customers who filed their 2013 taxes with TurboTax Deluxe (CD or download), completed prior year data transfer this year, and encounter an upgrade to either 2014 TurboTax Premier or 2014 TurboTax Home & Business (CD or download). Valid February 6, 2015 through April 20, 2015. TurboTax Advantage users are ineligible for this offer. This offer may not be combined with our $25 cash back offer. Terms and conditions are subject to change without notice.