Tax Talk 2016 FAQ

Earned Income

I have a daughter who lives with me, and I earn $26,000 per year. Can I qualify for the earned income credit?
The EIC is a special refundable tax benefit for workers earning low to moderate incomes. To qualify, you must be a U.S. citizen or resident alien for the entire year, have lived in the U.S. for more than half of the year, and have a valid Social Security number.
If you are married, your filing status cannot be “married, filing separately.” You cannot be a qualifying child or be claimed as a dependent on someone else’s return. If you do not have a qualifying child, you must be at least age 25 but under age 65 at the end of the year in which you claim the credit.

If you have no children, your adjusted gross income (AGI) or earned income, if greater, must be less than $14,880 ($20,430 for married filing jointly). If you have one qualifying child, your income must be less than $39,296 ($44,846 if filing jointly). With two qualifying children, the amount must be less than $44,648 ($50,198 if filing jointly). With three or more children, the amount must be less than $47,955 ($53,505 if MFJ).The income limits rise each year to keep pace with inflation.

To be eligible, your investment income (interest, dividends, capital gains, etc.) must be $3,400 or less in 2016. You cannot claim the EIC if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.

How much is the credit?
For 2016, the maximum credit amount is $3,373 for taxpayers with one qualifying child, $5,572 for filers with two qualifying children and $6,269 with three or more qualifying children. If there are no qualifying children, the maximum EIC is $506.

How do I claim the credit?
To claim the credit, attach Schedule EIC to your tax return. Most people can use the worksheet included in the instructions for Form 1040, Form 1040A or Form 1040EZ to compute the credit. You can claim the EIC on Form 1040EZ only if you do not have qualifying children. Taxpayers with more complex returns must figure their credit using the worksheet in IRS Publication 596, Earned Income Credit (EIC). If you choose to have the IRS figure the credit for you, carefully follow the steps in the instructions for your form or refer to Publication 596.

 American Institute of Certified Public Accountants Texas State Board of Public Accountancy