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How Does the Earned Income Tax Credit Work - YouTube
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how does the Earned Income Tax Credit
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work the Earned Income Tax Credit EITC
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is a benefit given to low and moderate
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income taxpayers with wage and or
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self-employment income you must file a
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tax return in order to claim a ITC it's
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part of your tax refund and can't be
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claimed separately EW I see is a
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refundable tax credit which means that
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you can receive it even if you don't owe
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taxes or will already do a refund if you
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owe additional taxes such as
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self-employment tax if you have your own
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business or receive 1099 income your e
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ITC can also be applied towards them to
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avoid making additional payments so II I
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TC is why you may get a very large
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refund that doesn't match up with the
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federal income tax withheld on your w-2
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or still get a refund despite having no
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taxes taken out of 1099 gigs the 4a ITC
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categories there are four categories
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that you may fall into when it comes to
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EITC based on how many children are
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dependent on you know qualifying
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children one qualifying child two
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qualifying children three or more
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qualifying children your adjusted gross
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income AGI needs to be less than the
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following amounts in order to claim a
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ITC in 2017 table from IRS gov the
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maximum EE ITC amount for each category
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in 2017 is as follows
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six thousand three hundred eighteen
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dollars with three or more qualifying
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children five thousand six hundred
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sixteen dollars with two qualifying
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children three thousand four hundred
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dollars with one qualifying child five
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hundred ten dollars with no qualifying
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children who is a qualifying child for a
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ITC purposes qualifying children need to
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have a social security number if your
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child was born recently and didn't get
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one issued yet you need to get them one
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by April 17 2018
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October 17th if you filed for a six
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month extension in time
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additionally there are age residency
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relationship and joint return
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requirements in order to claim a ITC by
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year-end your child needs to be younger
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than you or your spouse filing jointly
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and under 19 years of age 24 if a
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full-time student the child must also
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live with you or your spouse if filing
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jointly for more than half the year and
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in the case of older children they can't
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file a joint return with their spouse
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unless it was solely to get a tax refund
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as for relationship qualifying children
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can be your son daughter adopted child
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stepchild foster child or a descendent
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grandchild they can also be a sibling
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half sibling step sibling or descendant
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niece or nephew qualifying child of more
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than one person a common mistake made
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with AITC claims is when more than one
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person can use the same child such as
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divorced parents or people in
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multi-generational homes contributing to
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the same child support the tiebreaker
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rules come into effect if a child is
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supported by multiple people if both
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parents file jointly the child can only
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be their qualifying child if only one
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parent supports the child then that
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parent gets to claim them for children
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who live in two different households
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with both parents who don't filed a
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joint return together the parent who
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lives with the child longest during the
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year qualifies for a ITC if the child
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stayed with both parents for the same
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length during the year then the parent
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with the higher AGI claims the child in
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cases where the taxpayer is not the
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child's parent the person supporting
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that child who has the highest AGI gets
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to claim them for AITC purposes if
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someone else claims your qualifying
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child under the tiebreaker rule you can
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only get a ITC if you have a different
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qualifying child that would put you in
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one of the other a ITC categories you
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can't use the guidelines for the no
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qualifying children category what
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disqualifies you from claiming a ITC if
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you don't have any qualifying children
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you and your spouse if you're filing
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joint return need to be between 25 to 65
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years old by the end of the year so if
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you just turned 25 on New Year's Eve or
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don't turn 66 until New Year's Day
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you'll qualify for the year if you are
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under or over this age limit with no
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qualifying children you can't claim a
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it莽 regardless of whether you have
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qualifying children or not
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you also can't claim AITC if you use
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married filing separately status there
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is also a limit on investment income
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which includes interest dividends
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capital gains and rental income and it's
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the same for every filing status and
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EITC category for 2017 the limit is
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three thousand four hundred fifty
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dollars so if your investment income is
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greater than this you'll be ineligible
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if you have no investments but get
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casual rental income through Airbnb and
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similar apps you need to be aware that
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this is considered an investment income
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and could make you ineligible for EITC
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if your net rental income is over three
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thousand four hundred fifty dollars for
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the year however there are ways that you
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can turn this into earned income by
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providing additional services for casual
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rental guests which will increase your
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self-employment tax but enable you to
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keep your AITC 矛it c and persons with
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disabilities if you have a qualifying
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child who meets the relationship
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residency and joint return tests but is
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permanently and totally disabled they
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don't have to meet the age test and they
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don't have to be younger than you
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however you need to retain proof from a
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doctor or social services verifying that
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they can't engage in typical activities
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like having a job and their condition
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will last continuously for at least a
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year or the rest of their life if your
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child is receiving disability benefits
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you can still claim them for AITC
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purposes you can also do so if your
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child is working for minimal pay under
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sheltered employment programs in
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qualified locations such as homebound
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programs and the Department of Veterans
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Affairs EW I see is also not can
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sidered income for disability benefits
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purposes and not counted as a resource
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when getting assistance from any program
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using federal funds however you need to
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check with your state if your child
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receives state or local disability
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benefits regardless of what your filing
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status is and which AITC category you
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fall into be advised that if you qualify
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for a ITC you can file your return once
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tax season has commenced but your refund
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will be held until February 15th to
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verify your eligibility
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