skip navigation

Search Help
Navigation Help

Topic Index
ABCDEFGHI
JKLMNOPQR
STUVWXYZ#

Affordable Care Act
Tax Topic Index

International
Tax Topic Index

FAQs
Forms
Publications
Tax Topics

Comments
About Tax Map

IRS.gov Website
Publication 596
taxmap/pubs/p596-003.htm#en_us_publink1000298597

Chapter 4—Figuring and Claiming the EIC(p17)

rule
You must meet one more rule 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.
taxmap/pubs/p596-003.htm#en_us_publink1000298598

Rule 15—Earned Income Limits(p17)

rule
Your earned income must be less than:
taxmap/pubs/p596-003.htm#en_us_publink1000298602

Earned Income(p17)

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.
taxmap/pubs/p596-003.htm#en_us_publink1000298603

Figuring earned income. (p17)

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 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b.
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.
taxmap/pubs/p596-003.htm#en_us_publink1000298604
Clergy. (p17)
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).
taxmap/pubs/p596-003.htm#en_us_publink1000298605
Church employees. (p17)
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.
taxmap/pubs/p596-003.htm#en_us_publink1000298606
Nontaxable combat pay. (p18)
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. In other words, if one of you makes the election, the other one can also make it but does not have to.
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.
taxmap/pubs/p596-003.htm#en_us_publink1000298607

Example 1—election increases the EIC. (p18)

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 $3,250. 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 $3,250 on line 38a of their Form 1040A and enter the amount of their nontaxable combat pay on line 38b.
taxmap/pubs/p596-003.htm#en_us_publink1000298608

Example 2—election does not increase the EIC. (p18)

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 $2,267. 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 38a of their Form 1040A.
taxmap/pubs/p596-003.htm#en_us_publink1000298631

IRS Will Figure the EIC for You(p18)

rule
The IRS will figure your EIC for you if you follow the instructions in Figure 2.
EIC
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.
taxmap/pubs/p596-003.htm#en_us_publink1000298611

Figure 2. Steps To Follow To Have the IRS Figure Your EIC

taxmap/pubs/p596-003.htm#en_us_publink1000298612
Tax Tip
If you want the IRS to figure your income tax, see chapter 30 of Publication 17, Your Federal Income Tax.
taxmap/pubs/p596-003.htm#en_us_publink1000298632

How To Figure the EIC Yourself(p18)

rule
To figure the EIC yourself, use the EIC worksheet in the instructions for the form you are using (Form 1040, Form 1040A, or Form 1040EZ). If you have a qualifying child, complete Schedule EIC (discussed later in this chapter) and attach it to your tax return.
If you want the IRS to figure your EIC for you, see IRS Will Figure the EIC for You, earlier.
taxmap/pubs/p596-003.htm#en_us_publink1000298633

Special Instructions for Form 1040 Filers(p18)

rule
If you file Form 1040, you will need to decide whether to use EIC Worksheet A or EIC Worksheet B to figure the amount of your EIC. This section explains how to use these worksheets and how to report the EIC on your return.
taxmap/pubs/p596-003.htm#en_us_publink1000298620

EIC Worksheet A. (p18)

rule
Use EIC Worksheet A if you were not self-employed at any time in 2013 and are not a member of the clergy, a church employee who files Schedule SE, or a statutory employee filing Schedule C or C-EZ.
taxmap/pubs/p596-003.htm#en_us_publink1000298621

EIC Worksheet B. (p18)

rule
Use EIC Worksheet B if you were self-employed at any time in 2013 or are a member of the clergy, a church employee who files Schedule SE, or a statutory employee filing Schedule C or C-EZ. If any of the following situations apply to you, read the paragraph and then complete EIC Worksheet B.
taxmap/pubs/p596-003.htm#en_us_publink1000298622
Net earnings from self-employment $400 or more. (p18)
If your net earnings from self-employment are $400 or more, be sure to correctly fill out Schedule SE (Form 1040) and pay the proper amount of self-employment tax. If you do not, you may not get all the EIC you are entitled to.
EIC
When figuring your net earnings from self-employment, you must claim all your allowable business expenses.
taxmap/pubs/p596-003.htm#en_us_publink1000298624
When to use the optional methods of figuring net earnings. (p19)
Using the optional methods on Schedule SE to figure your net earnings from self-employment may qualify you for the EIC or give you a larger credit. If your net earnings (without using the optional methods) are less than $4,640, see the instructions for Schedule SE for details about the optional methods.
taxmap/pubs/p596-003.htm#en_us_publink1000298625
When both spouses have self-employment income. (p19)
You must complete both Parts 1 and 2 of EIC Worksheet B if all of the following conditions apply to you.
  1. You are married filing a joint return.
  2. Both you and your spouse have income from self-employment.
  3. You or your spouse files a Schedule SE and the other spouse does not file Schedule SE.
taxmap/pubs/p596-003.htm#en_us_publink1000298626

Statutory employees. (p19)

rule
Statutory employees report wages and expenses on Schedule C or C-EZ. They do not file Schedule SE. If you are a statutory employee, enter the amount from line 1 of Schedule C or C-EZ in Part 3 when you complete EIC Worksheet B.
taxmap/pubs/p596-003.htm#en_us_publink1000298634

Schedule EIC(p19)

rule
You must complete Schedule EIC and attach it to your tax return if you have a qualifying child and are claiming the EIC. Schedule EIC provides the IRS with information about your qualifying children, including their names, ages, SSNs, relationship to you, and the amount of time they lived with you during the year. An example of a filled-in Schedule EIC is shown in chapter 6.
EIC
If you are required to complete and attach Schedule EIC but do not, it will take longer to process your return and issue your refund.