When it comes to paying taxes, the Internal Revenue Service provides several tax credits that make it possible to reduce their income taxes. One prominent tax credit that is available to taxpayers is the Earned Income Tax Credit. The EITC is a credit that helps low and middle-income individuals to reduce their income taxes. This credit is especially viable for individuals who have children.
The EITC is a credit that provides benefits to people as an incentive to keep working even if they make a low income. The credit is refundable which means that if a taxpayer's tax liability is less than the credit, the tax filer gets a check from the IRS. One of the purposes of the credit is to help those with low incomes overcome the burden of paying for Social Security and Medicare taxes. Those who have dependent children living at home have a better chance of qualifying for the EITC.
Since it helps to have dependent children living at home with this credit, there are some specific guidelines that must be met to determine which children are considered qualifying children. To be considered a qualifying child, the child must share a residence, must be 18 or younger and must be a child, stepchild, foster child or adopted child of the taxpayer. The child has to live in the same residence as the taxpayer for least six months and one day to qualify. There are also exceptions to the 18-year age limit. If a child is 23 and a full-time student, he can qualify. If the child is permanently disabled and living at home, he can be any age and still qualify.
Since the Earned Income Tax Credit is primarily meant for people with low incomes, there are income limitations for people who try to claim the credit. Those who are married and file their taxes jointly can make up to $49,078 if they have three or more kids. If they have two kids, the couple can make as much as $46,044. Couples who make $41,132 can still qualify if they have one qualifying child. Couples who have no children have to make less than $18,740 if they want to qualify for the program. If the couple earns any money from investments, the investment income has to be less than $3,150 per year to qualify for the credit on income taxes.
Maximum Credit Amount
The maximum credit amount for couples who have three or more qualifying children is $5,751. It's $5,112 for couples with only two kids. The maximum credit amount drops down to $3,094 if you have one kid. Those with no children get as much as $464 in tax credits. This shows that those who have kids get a much bigger tax break from the Earned Income Tax Credit than those who do not have kids. Most people don't get the maximum credit. Instead, they receive a partial credit based on their eligibility factors.