Do you qualify for the Earned Income Credit (EIC) for 2021?
The Earned Income Credit (EIC) helps low-to-moderate-income taxpayers reduce their tax liability or even qualify for a tax refund. To qualify for the credit, the taxpayer must have adjusted gross income (AGI) below a certain amount and the taxpayer must meet the following requirements:
Have a valid Social Security Number (or the taxpayer is filing a joint return with a spouse that has a valid Social Security Number).
Have earned income from employment or self-employment.
Have a filing status other than married filing separately (exceptions apply for 2021)*
Be a U.S. citizen or resident alien all year , unless married to a U.S. citizen or resident alien AND filing a joint return.
Not be a qualifying child of another person.
Not have investment income that exceeds a certain amount (the threshold investment income would be raised from $2,200 to $10,000 for 2021).
Have a qualifying child who meets four tests (Age, Relationship, Residency, and Joint Return tests) (exceptions apply to childless taxpayers)**
* For 2021 tax year, there are several changes to this credit. The credit would be allowed for qualified married but separated spouses if a joint return is not filed. The taxpayer must have a qualifying child that lives with him/her for more than half of the taxable year and the taxpayer doesn’t live with his/her spouse for the last six months of the year, or has a separation decree, or agreement and does not live with his/her spouse by the end of the taxable year.
**You can now qualify for the EIC even if you have no children. The new rule is you can qualify for up to a credit of $1,502 for 2021, up from $543 from prior year, if you have no children and you fall within the income threshold. Also, the minimum age is decreased to 19 years old (except for students 24 years old and qualified former foster youth or homeless youth 18 years old). In addition, the prior rule that limited taxpayer to a maximum age of 64 to qualify for the credit is also eliminated for 2021 tax year.
Maximum Credit Amounts
The maximum amount of credit you can get all depends on the amount of dependents claimed, filing status, and your income amount:
No qualifying children: $1,502
1 qualifying child: $3,618
2 qualifying children: $5,980
3 or more qualifying children: $6,728
Note that if your earned income was higher in 2019 than in 2021, you can use the 2019 amount to figure your EITC for 2021. This temporary relief is provided through the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Please reach out to us with any further questions or concerns.
Source: IRS.gov
