To qualify for Earned Income Tax Credit or EITC, you must have earned income from employment, self-employment or another source and meet certain rules. In addition, you must either meet the additional rules for Workers without a Qualifying Child or have a child that meets all the Qualifying Child Rules for you.

To qualify for EITC, you and your spouse, if filing a joint return, must have a valid Social Security Number or SSN issued by the Social Security Administration.

Any qualifying child listed on the Schedule EIC must also have a valid SSN unless the child was born and died during the year. You cannot use Individual Taxpayer Identification Numbers (ITINs) or Adoption Taxpayer Identification Numbers (ATINs) to claim EITC. After the adoption is final and the child has a valid SSN, you may be able to file an amended return.

What is Earned Income?
 

Earned income includes all the taxable income and wages you get from working.

There are two ways to get earned income:You work for someone who pays you or
You work in a business you own.
Taxable earned income includes:Wages, salaries, and tips; Union strike benefits; Long-term disability benefits received prior to minimum retirement age; Net earnings from self-employment.

Nontaxable Combat Pay election. You can elect to have your nontaxable combat pay included in earned income for EITC. The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. Electing to include nontaxable combat pay in earned income may increase or decrease your EITC. See Publication 3. Armed Forces Tax Guide, for more information.

Examples of Income that is Not Considered Earned:                          

Interest and dividends pensions                                                                                                                             

Social  Security                                                                                                                                  

Unemployment benefits                                                                                                              

Alimony                                                                                                                                                 

Child support.

Tax Year 2009 and Preview Tax Year 20102009 EITC ARRA Changes and Inflation

Adjustments The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. ARRA also increases the beginning point of the phase-out range for the credit for all married couples filing a joint return, regardless of the number of children. These changes apply to 2009 and 2010 tax returns.

The credit begins to phase out at $21,420 for married taxpayers filing a joint return with children and completely phases out at $40,463 for one child, $45,295 for two children and $48,279 for three or more children. For married taxpayers filing a joint return with no children, the credit begins to phase out at $12,470 and completely phases out at $18,440.


 Preview of Tax Year 2010

Earned income and adjusted gross income (AGI) must each be less than:                                        

$43,352 ($48,362 married filing jointly) with three or more qualifying children                                         

$40,363 ($45,373 married filing jointly) with two qualifying children                                                      

$35,535 ($40,545 married filing jointly) with one qualifying child                                                             

$13,460 ($18,470 married filing jointly) with no qualifying children

Tax Year 2010 maximum credit:                                                                                                       

$5,666 with three or more qualifying children                                                                                        $5,036 with two qualifying children                                                                                                           $3,050 with one qualifying child

$457 with no qualifying children
                                                                                                      

*The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in EITC and expands the credit for workers with three or more qualifying children. These changes are temporary and apply to 2009 and 2010 tax years.

For more information on whether a child qualifies you for the EITC, see Publication 596, Chapter 2, Rules If You Have a Qualifying Child.

Investment income must be $3,100 or less for the year.

The maximum Advance EITC workers can receive from their employers is $1,830