How to Calculate Earned Income Tax Credit

The Internal Revenue Service offers a tax credit to low-income earners. The Earned Income Tax Credit helps offset the tax burden for people making less than a certain amount, especially if they are also caring for children. You can earn a credit for yourself and up to three children. The amount of the credit varies based on your income and the number of children you care for.

Step 1

Determine your eligibility for the EITC. To qualify for this credit, you must have earned income from self-employment or employment at an outside job under a certain limit. You cannot file separate returns as a married couple if you are claiming this credit. Children qualify you for the earned income credit if they are under the age of 18, or up to age 23 if they are full-time students, and lived with you for at least half the year. You cannot get this credit if someone else can claim you as a dependent on his taxes.

Step 2

Calculate your earned income. Earned income includes wages and tips as well as self-employment income. Report these amounts on Form 1040. Self-employment income should be reported on Schedule SE.

Step 3

Use worksheet A or B to calculate your EITC. Answer the questions on worksheet A if you do not have any self-employment income. Answer the questions on worksheet B if you have been self-employed during any time during the year.