The United States federal earned income tax credit or earned income credit (EITC or EIC) is a refundable tax credit for low- and medium-income individuals and couples, primarily for those who have qualifying children. When the credit exceeds the amount of taxes owed, it results in a tax refund to those who claim the credit. For a person or couple to claim one or more persons as their qualifying child(ren), the relationship, age, and shared residency requirements must be met, as well as some other requirements. U.S. tax forms 1040EZ, 1040A, or 1040 can be used to claim EIC without qualifying children. To claim the credit with qualifying children, 1040A or 1040 must be used along with Schedule EIC attached.
EIC phases in slowly, has a medium-length plateau, and then phases out more slowly than it phased in. And since the credit phases out at 21% (more than one qualifying child) or 16% (one qualifying child), it is always preferable to have one more dollar of actual salary or wages (although technically, since the EIC table moves by fifty dollar increments, it's always preferable to have an extra fifty-dollar increment of salary or wages).
For tax year 2012, the maximum EIC for a single person or couple filing without qualifying children is $475. The maximum EIC with one qualifying child is $3,169, with two children is $5,236, and with three or more qualifying children is $5,891. These amounts are indexed annually for inflation.
The earned income tax credit has been part of political debates in the United States regarding whether raising the minimum wage or increasing EIC will better address shortages of good-paying jobs, as seems to be frequently the case for modern economies.
Read more about Earned Income Tax Credit: Overview, Earned Income, Qualifying Children, Other Requirements, Disallowances For Reckless or Fraudulent Claims, Example(s) For 2012 From IRS Pub. 596, Impact, Cost, Uncollected Tax Credits, Storefront Tax Prep, “RACs,” Prep and Account Fees, Third-party Debt Collection, See Also
Famous quotes containing the words earned, income, tax and/or credit:
“... there is something quixotic in me about money, something meek and guilty. I want it and like it. But I cannot imagine insisting on it, pressing it out of people. I always vaguely feel: why should I have money when other people have it not? It is like taking the biggest piece of cake. And I can never feel that I have earned it.”
—Brenda Ueland (1891–1985)
“Italy is such a delightful place to live in if you happen to be a man. There one may enjoy that exquisite luxury of Socialism—that true Socialism which is based not on equality of income or character, but on the equality of manners. In the democracy of the caffè or the street the great question of our life has been solved, and the brotherhood of man is a reality. But it is accomplished at the expense of the sisterhood of women.”
—E.M. (Edward Morgan)
“Rumble thy bellyful! Spit, fire! Spout, rain!
Nor rain, wind, thunder, fire are my daughters.
I tax you not, you elements, with unkindness;
I never gave you kingdom, called you children.”
—William Shakespeare (1564–1616)
“If you love those who love you, what credit is that to you? For even sinners love those who love them.”
—Bible: New Testament, Luke 6:32.