Let’s start by answering the question “What is the Earned Income Tax Credit?” also known as EITC, we will use the abbreviation in the rest of the article. The first word in EITC is earned, which means you must have worked for someone or owned a business in the previous year to receive the credit. The credit is for people with low income, the credit starts to phase out the more money you earn, not the other way around.
Do you qualify?
Just because you’ve worked doesn’t mean you automatically qualify for these credits, there are guidelines we must follow. The biggest surprise for this credit is the age range that most people don’t know that must be between 25 and 65 years old. You can receive this credit even if you do not have children. You cannot receive this credit for your parents. The following people will qualify you for this credit:
• Siblings: sister, brother, stepbrother, stepsister, half-sister’s half-brother
• Children: son, daughter, stepson, adopted son, grandson
• Relatives – Niece, nephew
Your qualifying person must be 19 years of age or younger. If they go to school they must be 24 or younger, and they can be younger than you or totally disabled of any age.
They must live with you for more than half the year and did not provide more than half of their own support. The qualifying individual must not file a joint return or if filing a joint return is to receive a refund for income withheld or estimated tax payments.
Marital status for EITC purposes
EITC filing statuses are: Married Filing Jointly (MFJ), Single, Head of Household (HOH), or Widowed.
How much money can you receive?
The most important part is how much your refund is. The EITC can help reduce the amount you owe in federal and state taxes. Yes, California has an earned income tax credit. If your filing status is Single, MFJ, HOH, or Widowed, your adjusted income must be less than $15,010 with no qualifying children, the adjusted income of one qualifying child must be less than $39,617, the income of two children less than $45,007, the income of three or more children must be less than $48,350.
Married filing jointly Adjusted income must be less than $20,600 with no children Adjusted income from one child must be less than $45,207 Adjusted income from two children must be less than $50,597 Adjusted income from three or more children must be less at $53,950. Your investment income cannot be more than $3,450.
The maximum EITC credit without children is $510. Some people might not think it’s a lot of money. Helps reduce the amount of money you owe to the IRS. This is GREAT considering there was a time when you couldn’t get this credit without kids. The maximum credit for one child is $3,400, two children $5,616, three children $6,318. The increase from one child to two children is $2,216 while the increase from two children to three is $702, as you can see the money decreases when you go from two children to three children.
Add the credit to the money withheld from your paycheck each year and you could receive a substantial refund.
Bring the following documents to file
If someone else is helping you with your return, bring them the following documents.
• Social Security cards, a Social Security number verification letter, or other US government verification document for everyone you may include on the return.
• Dates of birth of all the people you can include on the return.
• Copies of last year’s federal and state returns, if you have them.
• All income statements: W-2 and 1099 forms, Social Security, unemployment, and other statements such as pensions, stocks, interest, and any documents showing taxes withheld. If you own or run a business or farm, collect records of all your income.
• All expense records, such as tuition, mortgage interest, or property taxes. If you own or run a business or farm, collect records of all your expenses.
• All information reporting forms such as 1095-A, 1095-B or 1095-C.
• Bank routing numbers and account numbers to direct deposit any refunds.
• Dependent child care information: name and address of paid caregivers and their Social Security number or other tax identification number.
Thank you for taking the time to read the EITC information.