Tax deadline day is fast approaching so it would certainly seem to be an appropriate time to highlight a little tax break that’s out there for those of us who are working and have ‘low to moderate’ income, in the parlance of the IRS. The Earned Income Tax Credit (EITC) allows you to reduce, or even completely eliminate, your federal income taxes if you meet certain criteria.
There are several tax brackets and different levels of credit allowed. This year if you are a worker who’s at least 19 years old, you have no qualifying children, and you’re filing single you’ll qualify for a credit of up to $1,502 if your income was below $21,430 in 2021. That income limit rises to $27,380 if you’re a spouse filing a joint return.
There are greater breaks for those with ‘qualifying’ children. A qualifying child must be related to you, the taxpayer. While that usually means the child is your son or daughter, the child can also be a niece, nephew, foster child, great-grandchild, and even a half-sibling. The child must also be under 19 years of age, or under 24 and a full- time student; and the child has to live with you at least half the year.
If you have three of those kids in the house and you file jointly you can qualify for the EITC if your income is up to $57,414; and the maximum credit is as much as $6,728. For a full list of the facts and figures go here Earned Income and Earned Income Tax Credit (EITC) Tables | Internal Revenue Service (irs.gov)
Along with the increases in credits and allowable income the IRS has also made some other advantageous changes. If you’re separated and only technically married you can now choose to file singly and could earn the tax credit that way. If your 2019 income was higher than it was in 2021 you can file using the former income and that might allow for a greater credit. Also significant is the raising of the allowable investment income, which is now set at $10,000. That figure will rise each year in line with inflation.
For more information on EITC, the changes in 2022 and for help with filing you can visit the IRS webpage here Changes to the earned income tax credit for the 2022 filing season | Internal Revenue Service (irs.gov)