The Earned Income Tax Credit (EITC) is a refundable credit designed to allow low to moderate income taxpayers to retain more of their earned income. Whether you have a child or not, you may qualify for the credit. The EITC credit is applied to your tax liability -- how much you owe -- and reduces it accordingly. As a refundable credit, it can reduce your liability to less than zero, resulting in a refund for you.
The EITC is a tax credit that takes into account your income, filing status and dependent status. You must have earned income -- wages, salaries, tips, union strike benefits, long-term disability benefits received prior to retirement age or net earnings from self-employment -- to be able to take the credit. Non-taxable combat pay can be used to meet the requirement.
To qualify for the EITC you must be a U.S. citizen, resident alien or a nonresident alien married to a U.S. citizen. You need a Social Security number and cannot use married, filing separately status. You cannot be the qualifying child of another person -- if a child qualifies for more than one person, and one is a parent, the non-parent claims the child if she has a higher adjusted gross income than the parent. If you don't have a child, you must have lived in the United States for more than half the year, you must be at least age 25, but less than age 65, and you cannot qualify as anyone else's dependent.
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Income limits may change, but for the 2010 tax year your earned income and adjusted gross income must have been less than $43,352 if you had three or more qualifying children -- $48,362 if married filing jointly; $40,363 if you had two qualifying children -- $45,373 if married filing jointly; $35,535 with one child -- $30,545 if married filing jointly; and $13,460 if you had no children -- $18,470 if married filing jointly. Your investment income must have been $3,100 or less for the tax year.
If you have three or more qualifying children, your maximum credit is $5,666. With two children your maximum credit is $5,036. If you only have one child you can receive up to $3,050 and if you have no children the maximum credit is $457, as of 2010. If you received advanced earned income credits from your employer during the tax year, you must file a tax return to report these payments.