The Earned Income Tax Credit (EITC) is a credit available to families that do not have a high income, helping them keep more of their hard-earned money.  In fact, it could mean up to $5,981 back in their pockets at tax time.

In 2009, the IRS estimated that the EITC lifted nearly seven million people out of poverty, almost half of whom were children.  However, one in five people eligible for the EITC miss out on it, either because they are not aware that they qualify or because they don’t file a tax return.

Here are answers to the most common questions regarding the EITC, to help you understand if you qualify.

EITC What you need to know

Who is eligible?

First, to get the credit, those eligible must file a tax return and claim it. In order to receive the EITC, you have to meet the following eligibility requirements:

  • Earn money from a job. This can be through a traditional job such as an employee, or you can be your own boss and earn money from self-employment.
  • Have a valid Social Security Number
  • Your filing status cannot be “married filing separately.”

There are other requirements including USA citizenship/resident alien status and limitations on investment and foreign income, but in general these are not issues that people otherwise qualified for the EITC face.

Are there income limitations?

Yes, for the 2012 tax year, your earned income (the money you receive from working) and your adjusted gross income (AGI, or the sum total of all your earnings minus certain deductions) must be less than:

  • $45,060 ($50,270 married filing jointly) with three or more qualifying children
  • $41,952 ($47,162 married filing jointly) with two qualifying children
  • $36,920 ($42,130 married filing jointly) with one qualifying child
  • $13,980 ($19,190 married filing jointly) with no qualifying children

If you make more than the amount listed above, you do not qualify for the EITC.

How do I know if my child is a qualifying child?

In order to count as a qualifying child under the EITC, children must meet ALL of the following requirements:

  • Has a valid Social Security Number
  • Is your natural child (natural, adopted or foster), grandchild, sibling, step-sibling, half-sibling, niece, or nephew
  • Is younger than you and younger than 19, unless a student (in which case the child must be less than 24), or permanently disabled (in which case there is no age limit)
  • Lives with you in the United States for more than half of the year
  • Doesn’t file a joint tax return

How much can you expect to receive if you are eligible for the EITC?

This year, workers can receive up to $5,981 by claiming the EITC on their tax returns.  The amount you can receive depends on a number of factors, including filing status, your number of children, and your income.

For additional information, visit the EITC website from the IRS. The EITC Finder  can also help by determining eligibility for the Earned Income Tax Credit.