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IRS.gov Website
Publication 596
taxmap/wpubs/p596-010.htm#en_us_publink1000167299

Chapter 4
Figuring and Claiming the EIC

You must meet one more rule to be eligible to claim the EIC.

You need to know the amount of your earned income to see if you meet the rule in this chapter. You also need to know that amount to figure your EIC.
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Rule 15. Your Earned Income Must Be Less Than:(p26)

rule
taxmap/wpubs/p596-010.htm#TXMP795366c6
Rule 15. (p26)
 Earned income limits
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Earned Income(p26)

rule
Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. 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. Earned income is explained in detail in Rule 7 in chapter 1.
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Figuring earned income.(p26)

rule
If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions.
Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 41a and 41b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 9a and 9b.
When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). You will then reduce that amount by any amount included on that line and described in the following list.
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Clergy.(p27)
If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also reported on line 7 (Form 1040), subtract that amount from the amount on line 7 (Form 1040) and enter the result in the first space of the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b. Put "Clergy" on the dotted line next to line 64a (Form 1040).
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Church employees.(p27)
A church employee means an employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. If you received wages as a church employee and included any amount on both line 5a of Schedule SE and line 7 (Form 1040), subtract that amount from the amount on line 7 (Form 1040) and enter the result in the first space of the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b.
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Nontaxable combat pay.(p27)
You can elect to include your nontaxable combat pay in earned income for the earned income credit. 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 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 EIC. Figure the credit with and without your nontaxable combat pay before making the election. Whether the election increases or decreases your EIC depends on your total earned income, filing status, and number of qualifying children. If your earned income without your combat pay is less than the amount shown below for your number of children, you may benefit from electing to include your nontaxable combat pay in earned income and you should figure the credit both ways. If your earned income without your combat pay is equal to or more than these amounts, you will not benefit from including your combat pay in your earned income.
The following examples illustrate the effect of including nontaxable combat pay in earned income for the EIC.
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Example 1 – election increases the EIC.(p27)

George and Janice are married and will file a joint return. They have one qualifying child. George was in the military and earned $15,000 ($5,000 taxable wages + $10,000 nontaxable combat pay). Janice worked part of the year and earned $2,000. Their taxable earned income and AGI are $7,000. George and Janice qualify for the EIC and fill out the EIC Worksheet and Schedule EIC.
When they complete the EIC worksheet without adding the nontaxable combat pay to their earned income, they find their credit to be $2,389. When they complete the EIC worksheet with the nontaxable combat pay added to their earned income, they find their credit to be $3,050. Because making the election will increase their EIC, they elect to add the nontaxable combat pay to their earned income for the EIC. They enter $3,050 on line 41a of their Form 1040A and enter the amount of their nontaxable combat pay on line 41b.
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Example 2 – election does not increase the EIC.(p27)

The facts are the same as Example 1 except George had nontaxable combat pay of $22,000. When George and Janice add their nontaxable combat pay to their earned income, they find their credit to be $1,841. Because the credit they can get if they do not add the nontaxable combat pay to their earned income is $2,389, they decide not to make the election. They enter $2,389 on line 41a of their Form 1040A.
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IRS Will Figure the EIC for You(p28)

rule
taxmap/wpubs/p596-010.htm#TXMP66abc1c7
Tip:(p28)
 If you want the IRS to figure your income tax, see Publication 967, The IRS Will Figure Your Tax.
The IRS will figure your EIC for you if you follow the instructions in Figure 3, below.
caution
Please do not ask the IRS to figure your EIC unless you are eligible for it. To be eligible, you must meet Rule 15 in this chapter as well as the rules in chapter 1 and either chapter 2 or chapter 3, whichever applies to you. If your credit was reduced or disallowed for any year after 1996, the rules in chapter 5 may apply as well.
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Figure 3. Steps To Follow To Have the IRS Figure Your EIC