The Earned Income Credit refers to a tax credit available to taxpayers between the ages of 25 and 65 whose income is below certain levels.
The EIC is surprisingly complex. The IRS publication on the subject, Publication 596, lists 15 bullet points under a table titled “Earned Income Credit in a Nutshell.”
Here’s a very basic overview of the EIC.
You Might Qualify for the EIC if:
- Your income is less than $14,340 (or $19,680 if married) and you have no children
- Your income is less than $37,870 (or 43,210 if married) and you have 1 child
- Your income is less than $43,038 (or $48,378 if married) and you have 2 children
- Your income is less than $46,227 (or $51,567 if married ) and you have 3 or more children
*-These numbers are based on the 2013 EIC.
The amount of credit is based on your “earned income,” which generally means wages and self-employment income.
There is a formula to determine the credit but in practice, everyone uses the chart in Publication 596 to determine the credit amount.