The EITC is a refundable tax credit designed to help lower income families and individuals rise above the poverty level. It is based on earned income: earnings from work, self employment, or from certain disability payments (not government or military disability). Neither, unemployment, social security, retirement income, alimony, nor child support counts as earned income. But, if you worked, and received income from one of the above mentioned sources, it may go into figuring if your income meet or exceed the limits to qualify for the EITC. (see table below)

To qualify, you must have a valid social security number, be a US citizen, resident alien, or nonresident alien married to a US citizen. You must have earned income, must not file “married filing separately” or be a qualifying child of someone else. Your adjusted gross income must meet certain limits and your investment income cannot be more than $3,200 for the year.

You can qualify with or without a qualifying child. In order to be a qualifying child, the child must have a valid social security number, be your child or your sibling (by birth, marriage, adoption or a foster child placed with you, or a descendant of any of these-grandchild niece or nephew), be younger than 19 or younger than 24 if a full-time student(if permanently disabled there is no age limit), live with you for more than half the year, and the qualifying child can’t file a joint return unless they are doing so only to receive a refund.

One myth I find disheartening about individuals who receive the EITC is that they do not pay taxes. They are part of the Romney’s 47%. Everyone who receives an income pays some form of taxes. Payroll taxes, state income taxes, sales and property taxes are just some examples. It’s hard, if not impossible, to live in the US and pay nothing to the government. The EITC is a subsidy for the poor, but the rich and middleclass get their fair share of subsidies too. The government gives tax deductions for owning a home, paying medical expenses, or giving to a charity. They even give you a credit for paying towards your health insurance or funding a retirement. Most tax forms are two pages long. The first page mainly deals with income and the second page deals with taxes, deductions and credits towards those taxes. Putting an amount in one box or another doesn’t matter; we are all benefiting in some way under the current tax code.  Below is some additional information concerning qualifying for the EITC.

2012 Tax year

Earned income and adjusted gross income must be less than:

  • $45,060 ($50,270 married filing jointly) with three of more qualifying children
  • $41,952 ($47,162 married filing jointly with two qualifying children
  • $36,920 ($42,130 married filing jointly) with one  qualifying child
  • $13,980 ($19,190 married filing jointly) with no qualifying children

2012 Tax Year maximum credit

  • $5,891 with three of more qualifying children
  • $5,236 with two qualifying children
  • $3,169 with one qualifying child
  • $475 with no qualifying children

Most states also have a state EITC you may be eligible for if you receive the federal EITC. Even if you don’t qualify for the EITC, you may still qualify for the Child Tax credit, the Dependent Care credit, or some of the other credits mentioned above. Allow Ten Talents to help you get all deductions and credits you are entitled to. Give us a call at 708-720-2860.

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