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taxmap/pub17/p17-189.htm#en_us_publink1000174677

Part A. Rules for Everyone(p242)


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This part of the chapter discusses Rules 1 through 7. You must meet all seven rules to qualify for the earned income credit. If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the chapter.
If you meet all seven rules in this part, then read either Part B or Part C (whichever applies) for more rules you must meet.
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Rule 1. Your AGI Must Be Less Than:(p243)


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Your AGI Must Be Less Than

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Adjusted gross income (AGI).(p243)


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Adjusted Gross Income (AGI)

AGI is the amount on line 38 (Form 1040), line 22 (Form 1040A), or line 4 (Form 1040EZ). If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC.
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Example.(p243)

Your AGI is $35,550, you are single, and you have one qualifying child. You cannot claim the EIC because your AGI is not less than $35,463. However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $40,463.
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Community property.(p243)
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If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. This is different from the community property rules that apply under Rule 7.
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Rule 2. You Must Have a Valid Social Security Number (SSN)(p243)


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To claim the EIC, you (and your spouse if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). Any qualifying child listed on Schedule EIC also must have a valid SSN. (See Rule 8 if you have a qualifying child.)
If your social security card (or your spouse's if filing a joint return) says "Not valid for employment" and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. An example of a federally funded benefit is Medicaid.
If you have a card with the legend "Not valid for employment" and your immigration status has changed so that you are now a U.S. citizen or permanent resident, ask the SSA for a new social security card without the legend.
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U. S. citizen.(p243)


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previous topic occurrence U.S. Citizen next topic occurrence

If you were a U. S. citizen when you received your SSN, you have a valid SSN.
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Valid for work only with INS or DHS authorization.(p243)


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Valid for Work Only with INS or DHS Authorization

If your social security card reads "Valid for work only with INS authorization," or "Valid for work only with DHS authorization," you have a valid SSN.
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SSN missing or incorrect.(p243)


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SSN Missing or Incorrect

If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC.
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Other taxpayer identification number.(p243)


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Other Taxpayer Identification Number

You cannot get the EIC if, instead of an SSN, you (or your spouse if filing a joint return) have an individual taxpayer identification number (ITIN). ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN.
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No SSN.(p243)


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If you do not have a valid SSN, put "No" next to line 64a (Form 1040), line 41a (Form 1040A), or line 9a (Form 1040EZ). You cannot claim the EIC.
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Getting an SSN.(p243)
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If you (or your spouse if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5, Application for a Social Security Card, with the SSA. You can get Form SS-5 online at www.socialsecurity.gov, from your local SSA office, or by calling the SSA at 1-800-772-1213.
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Filing deadline approaching and still no SSN.(p243)
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If the filing deadline is approaching and you still do not have an SSN, you have two choices.
  1. Request an automatic 6-month extension of time to file your return. You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. For more information, see chapter 1.
  2. File the return on time without claiming the EIC. After receiving the SSN, file an amended return (Form 1040X, Amended U.S. Individual Income Tax Return) claiming the EIC. Attach a filled-in Schedule EIC if you have a qualifying child.
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Table 36-1. Earned Income Credit in a Nutshell

First, you must meet all the rules in this column. Second, you must meet all the rules in one of these columns, whichever applies. Third, you must meet the rule in this column.
Part A.
Rules for Everyone
Part B.
Rules If You Have a Qualifying Child
Part C.
Rules If You Do Not Have a Qualifying Child
Part D.
Figuring and Claiming the EIC
1. Your adjusted gross income (AGI) must be less than:
• $43,279 ($48,279 for married filing jointly) if you have three or more qualifying children,

• $40,295 ($45,295 for married filing jointly) if you have two qualifying children,

• $35,463 ($40,463 for married filing jointly) if you have one qualifying child, or

• $13,440 ($18,440 for married filing jointly) if you do not have a qualifying child.
2. You must have a valid social security number.
3. Your filing status cannot be "Married filing separately."
4. You must be a U.S. citizen or resident alien all year.
5. You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income).
6. Your investment income must be $3,100 or less.  
7. You must have earned income.
8. Your child must meet the relationship, age, residency, and joint return tests.
9. Your qualifying child cannot be used by more than one person to claim the EIC.
10. You cannot be a qualifying child of another person.
11. You must be at least age 25 but under age 65.
12. You cannot be the dependent of another person.
13. You cannot be a qualifying child of another person.
14. You must have lived in the United States more than half of the year.
15. Your earned income must be less than:
• $43,279 ($48,279 for married filing jointly) if you have three or more qualifying children,

• $40,295 ($45,295 for married filing jointly) if you have two qualifying children,

• $35,463 ($40,463 for married filing jointly) if you have one qualifying child, or

• $13,440 ($18,440 for married filing jointly) if you do not have a qualifying child.
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Rule 3. Your Filing Status Cannot Be Married Filing Separately(p243)


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Your Filing Status Cannot Be Married Filing Separately

If you are married, you usually must file a joint return to claim the EIC. Your filing status cannot be "Married filing separately."
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Spouse did not live with you.(p243)


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Spouse Did Not Live with You

If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. In that case, you may be able to claim the EIC. For detailed information about filing as head of household, see chapter 2.
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Rule 4. You Must Be a  
U.S. Citizen or Resident  
Alien All Year(p244)


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previous topic occurrence You Must Be a U.S. Citizen or Resident Alien All Year next topic occurrence

If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. You can use that filing status only if one spouse is a U.S. citizen or resident alien and you choose to treat the nonresident spouse as a U.S. resident. If you make this choice, you and your spouse are taxed on your worldwide income. If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter "No" on the dotted line next to line 64a (Form 1040) or in the space to the left of line 41a (Form 1040A). If you need more information on making this choice, get Publication 519, U.S. Tax Guide for Aliens.
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Rule 5. You Cannot File Form 2555 or Form 2555-EZ(p244)


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previous topic occurrence You Cannot File Form 2555 or Form 2555-EZ next topic occurrence

You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. U.S. possessions are not foreign countries. See Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for more detailed information.
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Rule 6. Your Investment Income Must Be $3,100 or Less(p244)


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You cannot claim the earned income credit unless your investment income is $3,100 or less. If your investment income is more than $3,100, you cannot claim the credit. For most people, investment income is the total of the following amounts. If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words "Form 1040EZ" on line 2.
However, if:  
see Rule 6 in chapter 1 of Publication 596.
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Rule 7. You Must Have Earned Income(p244)


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This credit is called the "earned income" credit because, to qualify, you must work and have earned income. If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. If you are an employee, earned income includes all the taxable income you get from your employer. If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040.
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Earned Income(p244)


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Earned income includes all of the following types of income.
  1. Wages, salaries, tips, and other taxable employee pay. Employee pay is earned income only if it is taxable. Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained below.
  2. Net earnings from self-employment.
  3. Gross income received as a statutory employee.
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Wages, salaries, and tips.(p244)


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Salary, Wage, and Tip

Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040).
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Nontaxable combat pay election.(p244)


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Nontaxable Combat Pay Election

You can elect to include your nontaxable combat pay in earned income for the earned income credit. Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. Figure the credit with and without your nontaxable combat pay before making the election. If you make the election, you must include in earned income all nontaxable combat pay you received. If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. The amount of your nontaxable combat pay should be shown in box 12 of your Form W-2 with code "Q".
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Self-employed persons and statutory employees.(p244)


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Self-employed Persons and Statutory Employees

If you are self-employed or received income as a statutory employee, you must use the Form 1040 instructions to see if you qualify to get the EIC.
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Approved Form 4361 or Form 4029(p244)


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This section is for persons who have an approved:
Each approved form exempts certain income from social security taxes. Each form is discussed in this section in terms of what is or is not earned income for purposes of the EIC.
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Form 4361.(p244)


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previous topic occurrence Application for Exemption From Self-Employment Tax for Use By Ministers, Members of Religious Orders and Christian Science Practitioners next topic occurrence

Even if you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. This includes wages, salaries, tips, and other taxable employee compensation. A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. Examples include fees for performing marriages and honoraria for delivering speeches.
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Form 4029.(p244)


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Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits

Even if you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. However, amounts you received as a self-employed individual do not count as earned income. Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040.
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Disability Benefits(p244)


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If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age.
Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Report taxable pension payments on Form 1040, lines 16a and 16b (or Form 1040A, lines 12a and 12b).
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Disability insurance payments.(p244)


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Disability Insurance Payments

Payments you received from a disability insurance policy that you paid the premiums for are not earned income. It does not matter whether you have reached minimum retirement age. If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code "J."
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Income That Is Not Earned Income(p244)


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Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Do not include any of these items in your earned income.
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Earnings while an inmate.(p244)


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Earnings While an Inmate

Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. This includes amounts for work performed while in a work release program or while in a halfway house.
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Workfare payments.(p245)


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Workfare Payments

Nontaxable workfare payments are not earned income for the EIC. These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities.
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Community property.(p245)


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previous topic occurrence Community Property next topic occurrence

If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws.
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Nontaxable military pay.(p245)


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Nontaxable Military Pay

Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). See Publication 3, Armed Forces' Tax Guide, for more information.
Deposit
Combat pay. You can elect to include your nontaxable combat pay in earned income for the EIC. See Nontaxable combat pay election, earlier.