Earned income tax credit awareness day was January 27. The IRS and community organizations across the country shared information about how some eligible low-to-moderate income families could receive a tax break, or refund, of up to $6,935.
This year’s earned income credit awareness day was the 17th annual media push designed to let more people know what the earned income tax credit is and how to determine whether they qualify.
The IRS says that awareness is critical because millions of workers will qualify for the earned income tax credit for the first time this year.
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Earned Income Credit Awareness
The earned income tax credit (EITC), also called the earned income credit (EIC), can be overlooked because many people who may be eligible don’t know about the credit, or don’t know how to claim it.
Some communities at risk of overlooking the credit include Veterans, low-to-moderate-income households without children, individuals with disabilities, and people living in nontraditional homes, according to the IRS.
Awareness is also important because many workers move in and out of eligibility for the earned income credit each year due to life changes like job loss, divorce, becoming a parent, or getting married.
Last year, nationwide, the IRS says that 31 million eligible workers and families received a total of about $64 billion in earned income credits. The average earned income credit amount received was a little over $2,000.
What is the Earned Income Credit (EIC)?
The earned income credit is a refundable tax credit generally designed for people whose earned income was under $59,187 during 2022. Because the EIC is refundable, it can lower the amount of taxes that you owe. Or the credit can result in a tax refund after you file your tax return. The maximum earned income credit amount is currently $6,935.
“Earned income” is all the taxable income, including wages, that you receive either from a job or from self-employment. There are various rules for claiming the EIC that depend on factors including your adjusted gross income, filing status, and whether you have a “qualifying child.”
A so-called qualifying child must have a valid social security number and cannot be claimed by more than one person on a tax return. Also, qualifying children are generally under age nineteen. But they can be any age if they are permanently or totally disabled. (There are other requirements for qualifying children under age 24 who are full time students.)
However, to receive the EIC, you must file a federal income tax return. (That’s true even if you aren’t usually required to file a return, or don’t owe any tax.) Also, if you have investment income, it cannot be more than $10,300.
Children and the Earned Income Credit
For the 2022 tax year, if you have three or more qualifying children, the EIC range is from eleven dollars to $6,935. Then the credit amount goes down with fewer qualifying children.
For example, if you have only one qualifying child, the EIC ranges from nine dollars to $3,733. However, if there are two qualifying children in your family, the credit could be as much as $6,164.
Note: There are different income limits that apply to each filing status depending on the number of qualifying children. The IRS has a chart on its website that can help you figure out what range applies for your 2022 tax return.
One group that often overlooks the EIC are low-to-moderate income workers who don’t have children. That is partly because many people think that you must have a child to claim the earned income tax credit.
In fact, you can still claim the EIC even if you do not have a qualifying child. In that case, the credit for 2022 ranges from as little as four dollars to as much as $560.
Whatever your situation, the earned income credit rules and requirements can be confusing, so you can check to see if you are able to claim the EIC by visiting www.IRS.gov/eitc (opens in new tab). You can also see IRS Publication 596 (opens in new tab), which explains the rules and requirements for the EIC.
And, if you made less than $60,000 in 2022, various community sites throughout the country offer free tax preparation assistance.
State Earned Income Credits
You might be eligible for an earned income credit on your state tax return. Twenty-eight states and the District of Columbia, plus New York City, offer versions of the earned income credit for 2022.
To learn more about whether your state offers an earned income credit and whether you can claim it, visit the IRS information page on state and local governments with earned income tax credits (opens in new tab).