[2012 update] The IRS has officially released 2012 tax details and here are the changes to the Earned Income and Child Tax Credits:
- The 2012 Child Tax Credit (CTC) will remain at $3,000, thanks to provisions in the bush-era tax cuts extension. This extension will ensure an ongoing tax cut to 10.5 million lower income families with 18 million children.
- The 2012 Earned Income Tax credit (EITC) changes are shown in the table below: The “earned income amount” (line 1) is the amount of income (minimum limit) at or above which the maximum amount of the earned income credit (line 2) is allowed. The “threshold phaseout amount“ (line 4) and “completed phaseout amount” (line 5) are the adjusted gross income (AGI) ranges from where the EITC begins to phase out to where it reaches $0, or the income at or above which no credit is allowed. These ranges change depending on the filing status.
Example on figuring the EITC: Your AGI is $43,000, you are single, and you have two qualifying children. You cannot claim the EITC because your AGI is not less than the 2012 completed (maximum) phase out limit of $41,952. However, if your filing status was married filing jointly, you would be able to claim some of the EITC because your AGI is less than $47,162 complete phase out limit. You cannot get the fill EITC because your income is above the $22,300 threshold phase amount. Further examples and details are provided in the previous updates below.
2012 Earned Income Tax Credit (source : IRS)
Note: The earned income tax credit is not allowed at all if the aggregate amount of certain investment income exceeds $3,200 for the given tax year.
___________________
[Updated] As part of bush-era tax cuts extension legislation (Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010), a number of existing tax breaks were extended. One is the Earned Income Tax Credit (EITC), which as discussed below, supplements the wages of low income workers, and especially working mothers, lifting more children out of poverty than any other single program or category of programs. The EITC will help 6.5 million working parents with 15 million children.
Under the 2008 Recovery Act, the EITC was expanded to reduce the marriage penalty and to create a “third tier” of the EITC for families with three or more children. This means larger families now receive up to $1,040 more than they would have under the old system. By extending the EITC the following benefits continue:
• About 6 million families will receive an expanded EITC tax credit. Without this agreement, these families could lose up to $1,040.
• About 1 million families headed by single mothers will receive an expanded EITC tax credit
The other tax break that was extended for two years was the Child Tax Credit (CTC), which is worth about $1,000 per eligible child, within the $3,000 refundability threshold. This extension will ensure an ongoing tax cut to 10.5 million lower income families with 18 million children.
The Child Tax Credit helps low-and moderate-income families with children. The credit allows families to reduce their federal income tax by a certain amount for each qualifying child under the age of 17 in a household. In the 2008 Recovery Act, the Administration and Congress secured an important expansion in the Child Tax Credit for lower income families by lowering the minimum amount from about $12,500 to $3,000.
For many of these families, extending the minimum threshold in the CTC will result in thousands of dollars in additional tax benefits that would have otherwise been lost. For example:
- A married couple with three children making $23,000 will receive $3,000 in child tax credits compared to about $1,540 if only the 2001/2003 tax cuts were extended – an increase of about $1,460.
- A single mother with two children making $17,000 will receive $2,000 in child tax credits compared to about $640 if only the 2001/2003 tax cuts were extended – an increase of about $1,360.
- 2011 EITC Income and Credit Phaseout Limits
Source : Whitehouse.gov
_________
One of the most claimed, but least understood and publicized is the Earned Income Credit (EIC) for low income earners. Thanks to Obama’s Economic Stimulus Package this credit has received a considerable bump for tax years 2009 and 2010 and many families may now qualify for this credit. The EIC is basically a tax credit for certain people who earn and income (hence the name of the credit) and have less than $48,279 of earned income. Because it is a tax credit it is money straight in your pocket (refund) or reduces the amount of tax you owe. The table below provides a summary of the qualification criteria for the credit:
As shown in the table, the amount of EITC and income thresholds increase in 2009 and 2010 for workers with a third qualifying child. Also, the definition of qualifying child has also changed in 2009, which is now:
·To be your qualifying child, a child must be younger than you unless the child is permanently and totally disabled.
·A child cannot be your qualifying child if he or she files a joint return, unless the return was filed only as a claim for refund.
·If the parents of a child can claim the child as a qualifying child but no parent so claims the child, no one else can claim the child as a qualifying child unless that person’s adjusted gross income (AGI) is higher than the highest AGI of any of the child’s parents who can claim the child.
Example of claiming the EIC: Your AGI is $35,550, you are single, and you have one qualifying child. You cannot claim the EIC because your AGI is not less than $35,463. However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $40,463.
Additional Criteria and Claiming the Earned Income Credit in your Tax Return
If you are eligible for the EIC based on the above criteria, you normally claim in your tax return. To claim the EIC credit you (and your spouse if filing a joint return) must also have a valid SSN issued by the Social Security Administration (SSA). Any qualifying child listed on Schedule EIC also must have a valid SSN. You can request an extension if you do not have your SSN. Other criteria you must meet to claim the EITC :
-Your investment income is $3,100 or less. If your investment income is more than $3,100, you cannot claim the credit.
-You Must Be a U.S. Citizen or Resident Alien All Year
-You must however have earned income through working during the year (hence the name of the credit). If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. If you are an employee, earned income includes all the taxable income you get from your employer. If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040
-If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age
-If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier.
If you expect to qualify for the earned income credit in 2010, you may be able to receive part of it in each paycheck throughout the year from your employer (the maximum Advance EITC workers can receive from their employers is $1,830). For more information on the above, you can refer to the IRS Publication 596
Related:
~ 2009 vs. 2010 Federal Income Tax Brackets
~ 2009 Federal Income Tax Guide
~ How to Get a Free Copy of your IRS Tax Return
~ Stimulus Payments in 2010 & 2011
More Related posts:
- Child Tax Credit Extension For 2011-2012
- American Opportunity Education Tax Credit (AOTC) Extension for 2011 and 2012 – Eligibility, Income and Phase-out Limits
- 2011 & 2012 Paycheck Changes: Payroll Tax Credit Extension
- 2011 Tax Brackets – Updated IRS Federal Income Tax Tables and Income Thresholds
- 2012 Unemployment Benefits Insurance Extension Updates. New Bills, Tier 5 Provision for 99ers
{ 20 comments… read them below or add one }
My average tax return is usually around $8,000. I file head of household with 3 children. My income for 2011 is $19383.00 and when I entered all my information for my 2011 taxes, my return says that I am only going to get around $2600 back this year. I don’t understand why I am not getting the earned income credit and child tax credit amounts like I have in the previous years.
The 2011 tax year was the first year I have ever made wages my family could live on without any extra assistance (around $65,000 gross). I have one daughter, a wife, a load of bills (none of them consumer debt), and around $600 per month in student loans payments. Is there any relief from the tax code for someone like me that is trying to live frugally but is paying an exorbitant amount of money to both the Department of Education and Sallie Mae for my college as well as my wife’s student loans? I am the sole wage earner, so this is a hefty burden (actually it is higher than our rent!)
The Internal Revenue Service and community partners nationwide today launched their annual outreach campaign aimed at helping millions of Americans who earned $49,078 or less take advantage of the Earned Income Tax Credit (EITC).
is there a minimum amount you have to make in a year to qualify for child tax credit?
The “earned income amount” (line 1) in the table of the article is the minimum earnings required to claim the EITC.
I’m 17 years old, I don’t have a job, and I’m graduating this year in may from highschool. I haven’t lived with my mother since I was 16. I have lived with my older sister who is 28, for right under a year. she also has 3 children; 9, 6, and 4. her fiance, my brother in law was wondering if he could claim me even though I’m not blood related to HIM. I have read on H&R Block that he can claim me if I’ve lived in his household & he provides for me all year. but I’ve also read that he can’t claim me at all if were not blood related. if somebody could clarify me what he can or can’t do on his taxes tht involve me, it would be great! please & thank youu!
Yes, he can carry you on his return. Go to IRS.gov for more information on Qualifying Relative
There are four tests that must be met for a person to be your qualifying relative. The four tests are:
Not a qualifying child test,
Member of household or relationship test,
Gross income test, and
Support test.
thank you so much! I will definitely go to that website and look at all of it.
In 2011 what is the tax bracket for EIC for two children
I see 2009 & 2010 but nothing on 2011. Is it the same or higher?
The top tables contain 2011 and 2012 data. There were slight increases.
I am working on my own doing housekeeping. I am 69 yrs old. Do i have to pay federal and state taxes to qualify for the earned income credit? If yes how do I do it? I make around $640.00 a month but it varies, not more but less. How about sec. sec. and medicare taxes?
No, you dont have pay FED and State taxes to qualify for the EIC. But you will have to pay self employment taxes for Social Security and Medicare. You could also owe taxes for FED and State (if you live in a taxable state) for the money you earned.
I have a stepdaughter who turned 25 in November of 2010. Am I still allowed to recieve EIC
for her in this years taxes?
I am just confused about the whole tax thing can someone please explain to me because everything so crazy.
Wow, if the entire tax thing is bewildering to you perhaps you could self educate by google.com asking specific questions.
You can also go to a search on your states taxes and just read, read, read. . .
When in doubt. . . ask more questions.
1st. If you do any type of work that you get paid for you must file taxes.
2. If you honestly know nothing about taxes, have a professional do them for you.
3. There is often a charge for someone to do your taxes for you. Ask people in your local community who they recommend.
4. Good luck!
I HAVE 3 CHILDREN 11, 12, AND 20. I KNOW THAT I CAN CLAIM EITC FOR MY 11 AND 12 YR OLD BUT WHAT ABOUT MY 20 YR OLD. SHE LIVES WITH ME GOES TO COLLEGE I SUPPORT HER, SHE DOES NOT HAVE A JOB. I KNOW THAT I CAN CLAIM HER ON MY TAXES, BUT WHAT ABOUT THE EITC CREDIT OR CAN I CLAIM HER ON SOMETHING ELSE AND STILL RECEIVE SOME MONEY FOR HER? THANK YOU
You will be allowed to claim the EIT for you college student for this and the next tax season. As long as she is in school. You also may be eligible for the American Tax Opportunity if you have out of pocket expenses towards her tution. You have a choice to either take that money to lower your AGI under section 2 of the 1040 form titled education/tution or take the tax credit.
How much money do you have to earn to qualify for the eic?
Maegen, Read the above article….It depends on your specific situation..
{ 8 trackbacks }