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Current Year Tax Map
Publication 554
taxmap/pubs/p554-015.htm#en_us_publink100043734

Earned Income Credit (EIC)(p29)

rule
The earned income credit (EIC) is a refundable tax credit for certain people who work and have earned income under $50,270. The EIC is available to persons with or without a qualifying child.
taxmap/pubs/p554-015.htm#en_us_publink100043735

Credit has no effect on certain welfare benefits.(p29)

rule
Any refund you receive because of the EIC generally will not be considered income when determining whether you are eligible for the following benefit programs, or how much you can receive from the programs. However, if the amounts you receive are not spent within a certain period of time, they may count as an asset (or resource) and affect your eligibility. Please check with your state.
taxmap/pubs/p554-015.htm#en_us_publink100043737

Do You Qualify for the Earned Income Credit (EIC)?(p29)

rule
To qualify to claim the EIC, you must first meet Rules 1 through 7 in Part A of Table 5-1, Rules for Everyone. Then you must meet Rules 8 through 10 in Part B of Table 5-1, Rules If You Have a Qualifying Child, or Rules 11 through 14 in Part C of Table 5-1, Rules If You Do Not Have a Qualifying Child. There is one final rule you must meet, Rule 15, in Part D of Table 5-1, Figuring and Claiming the EIC. You qualify for the credit if you meet all the rules in each part that applies to you.
taxmap/pubs/p554-015.htm#en_us_publink100043738

Table 5-1, Earned Income Credit (EIC) in a Nutshell.(p29)

rule
Use Table 5-1 as a guide to Parts A, B, C, and D. The table is a summary of all the rules in each part. After you have read the rules in the table, if you think you may qualify for the credit, see Publication 596, Earned Income Credit, for more details. You also can find more information in the instructions for Form 1040 (line 64a), Form 1040A (line 38a), or Form 1040EZ (line 8a).
taxmap/pubs/p554-015.htm#en_us_publink100043739

Adjusted gross income (AGI).(p29)

rule
Under Rule 1, you cannot claim the EIC unless your AGI is less than the applicable limit shown in Part A of Table 5-1. Your AGI is the amount on line 37 (Form 1040), line 21 (Form 1040A), or line 4 (Form 1040EZ).
taxmap/pubs/p554-015.htm#f10311gc3701

Table 5-1. Earned Income Credit (EIC) 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:
•$45,060 ($50,270 for married filing jointly) if you have three or more qualifying children,
•$41,952 ($47,162 for married filing jointly) if you have two qualifying children,
•$36,920 ($42,130 for married filing jointly) if you have one qualifying child, or
•$13,980 ($19,190 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 $3,200 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 generally 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 generally 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:
•$45,060 ($50,270 for married filing jointly) if you have three or more qualifying children,
•$41,952 ($47,162 for married filing jointly) if you have two qualifying children,
•$36,920 ($42,130 for married filing jointly) if you have one qualifying child, or
•$13,980 ($19,190 for married filing jointly) if you do not have a qualifying child.
taxmap/pubs/p554-015.htm#en_us_publink100043740

Social security number.(p29)

rule
Under Rule 2, you (and your spouse if you are married filing jointly) must have a valid social security number (SSN) issued by the Social Security Administration (SSA). Any qualifying child listed on Schedule EIC also must have a valid SSN. (See Qualifying child, later, if you have a qualifying child.)
If your social security card (or your spouse's if you are married filing jointly) 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.
taxmap/pubs/p554-015.htm#en_us_publink100043741

Investment income.(p29)

rule
Under Rule 6, you cannot claim the EIC unless your investment income is $3,200 or less. If your investment income is more than $3,200, 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.
For more information about investment income, see Publication 596, Earned Income Credit.
taxmap/pubs/p554-015.htm#en_us_publink100043742

Earned income.(p29)

rule
Under Rule 7, you must have earned income to claim the EIC. Under Rule 15, you cannot claim the EIC unless your earned income is less than the applicable limit shown in Table 5-1, Part D. 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 generally not earned income.
  2. Net earnings from self-employment.
  3. Gross income received as a statutory employee.
taxmap/pubs/p554-015.htm#en_us_publink1000259349

Gross income defined.(p29)

rule
Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Do not include any social security benefits unless (a) you are married filing a separate tax return and you lived with your spouse at any time in 2012, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b) applies, see the Instructions for Form 1040, lines 20a and 20b to figure the taxable part of social security benefits you must include in gross income.
taxmap/pubs/p554-015.htm#en_us_publink1000242331
Self-employed persons.(p30)
If you are self-employed and your net earnings are $400 or more, be sure to correctly fill out Schedule SE (Form 1040), Self-Employment Tax, and pay the proper amount of self-employment tax. If you do not, you may not get all the credit to which you are entitled.
taxmap/pubs/p554-015.htm#en_us_publink100043743
Disability benefits.(p30)
If you retired on disability, 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. Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income.
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."
taxmap/pubs/p554-015.htm#en_us_publink100043744

Income that is not earned income.(p30)

rule
Examples of items that are not earned income under Rule 7 include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits — except for payments covered under Disability benefits earlier), 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.
taxmap/pubs/p554-015.htm#en_us_publink100043745
Workfare payments.(p30)
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.
taxmap/pubs/p554-015.htm#en_us_publink100043746

Qualifying child.(p30)

rule
Under Rule 8, your child is a qualifying child if your child meets four tests. The four tests are:
  1. Relationship,
  2. Age,
  3. Residency, and
  4. Joint return.
The four tests are illustrated in Figure 5-C. See Publication 596 for more information about each test.
taxmap/pubs/p554-015.htm#en_us_publink1000242364

Figure 5-C. Tests for Qualifying Child

A qualifying child for the EIC is a child who is your...
Son, daughter, stepchild, foster child,
or a descendant of any of them (for example, your grandchild)
OR
Brother, sister, half brother, half sister, stepbrother,
stepsister, or a descendant of any of them (for example, your
niece or nephew)
and
was ...
Under age 19 at the end of 2012 and younger than you (or your spouse if filing jointly)
OR
Under age 24 at the end of 2012, a student, and younger than you (or your spouse if filing jointly)
OR
Permanently and totally disabled at any time during the year, regardless of age
and
who...
Is not filing a joint return for 2012
(or is filing a joint return for 2012 only as a claim for refund)
and
who...
Lived with you in the United States for more than half
of 2012.
If the child did not live with you for the
required time, see Publication 596 for more information.
taxmap/pubs/p554-015.htm#en_us_publink100043747

Figuring the EIC(p31)

rule
To figure the amount of your credit, you have two choices.
  1. Have the IRS figure the EIC for you. If you want to do this, see IRS Will Figure the EIC for You in Publication 596.
  2. Figure the EIC yourself. If you want to do this, see How To Figure the EIC Yourself in Publication 596.