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:
“I have not earned what I have already enjoyed.”
—Henry David Thoreau (1817–1862)
“The question for the country now is how to secure a more equal distribution of property among the people. There can be no republican institutions with vast masses of property permanently in a few hands, and large masses of voters without property.... Let no man get by inheritance, or by will, more than will produce at four per cent interest an income ... of fifteen thousand dollars] per year, or an estate of five hundred thousand dollars.”
—Rutherford Birchard Hayes (1822–1893)
“Change of fashion is the tax levied by the industry of the poor on the vanity of the rich.”
—Sébastien-Roch Nicolas De Chamfort (1741–1794)
“The thief steals from himself. The swindler swindles himself. For the real price is knowledge and virtue, whereof wealth and credit are signs. These signs, like paper money, may be counterfeited or stolen, but that which they represent, namely, knowledge and virtue, cannot be counterfeited or stolen.”
—Ralph Waldo Emerson (1803–1882)