Publication 596
taxmap/pubs/p596006.htm#en_us_publink1000297452You cannot claim the earned income credit unless your investment income is $3,350 or less. If your investment income is more than $3,350, you cannot claim the
credit.
taxmap/pubs/p596006.htm#en_us_publink1000297454If you file Form 1040EZ, your investment income is the total of the amount on line 2 and the amount of any taxexempt interest you wrote to the right of the words "Form 1040EZ" on line
2.
taxmap/pubs/p596006.htm#en_us_publink1000297455If you file Form 1040A, your investment income is the total of the amounts on lines 8a (taxable interest), 8b (taxexempt interest), 9a (ordinary dividends), and 10 (capital gain distributions) on that
form.
taxmap/pubs/p596006.htm#en_us_publink1000297456If you file Form 1040, use Worksheet 1 in this chapter to figure your investment
income.
taxmap/pubs/p596006.htm#en_us_publink1000297462Worksheet 1. Investment Income If You Are Filing Form 1040Use this worksheet to figure investment income for the earned income credit when you file Form
1040.
Interest and Dividends     
1.  Enter any amount from Form 1040, line 8a  1.  
2.  Enter any amount from Form 1040, line 8b, plus any amount on Form 8814, line
1b  2.  
3.  Enter any amount from Form 1040, line 9a  3.  
4.  Enter the amount from Form 1040, line 21, that is from Form 8814 if you are filing that form to report your child's interest and dividend income on your return. (If your child received an Alaska Permanent Fund dividend, use Worksheet 2 in this chapter to figure the amount to enter on this line.)
 4.  
Capital Gain Net Income     
5.  Enter the amount from Form 1040, line 13. If the amount on that line is a loss, enter
0  5.    
6.  Enter any gain from Form 4797, Sales of Business Property, line 7. If the amount on that line is a loss, enter 0. (But, if you completed lines 8 and 9 of Form 4797, enter the amount from line 9 instead.)
 6.    
7.  Subtract line 6 of this worksheet from line 5 of this worksheet. (If the result is less than zero, enter
0.)  7.  
Royalties and Rental Income From Personal Property     
8.  Enter any royalty income from Schedule E, line 23b, plus any income from the rental of personal property shown on Form 1040, line 21
 8.    
9.  Enter any expenses from Schedule E, line 20, related to royalty income, plus any expenses from the rental of personal property deducted on Form 1040, line 36
 9.    
10.  Subtract the amount on line 9 of this worksheet from the amount on line 8. (If the result is less than zero, enter
0.)  10.  
Passive Activities     
11.  Enter the total of any net income from passive activities (such as income included on Schedule E, line 26, 29a (col. (g)), 34a (col. (d)), or 40). (See instructions below for lines 11 and 12.)
 11.    
12.  Enter the total of any losses from passive activities (such as losses included on Schedule E, line 26, 29b (col. (f)), 34b (col. (c)), or 40). (See instructions below for lines 11 and 12.)
 12.    
13.  Combine the amounts on lines 11 and 12 of this worksheet. (If the result is less than zero, enter
0.)  13.  
14.  Add the amounts on lines 1, 2, 3, 4, 7, 10, and 13. Enter the total.
This is your investment income  14.  
15.  Is the amount on line 14 more than
$3,350? ❑
Yes. You cannot take the credit. ❑
No. Go to
Step 3
of the Form 1040 instructions for lines 66a and 66b to find out if you can take
the credit (unless you are using this publication to find out if you can take
the credit; in that case, go to
Rule 7, next).
  

Instructions for lines 11 and 12.
In figuring the amount to enter on lines 11 and 12, do not take into account any
royalty income (or loss) included on line 26 of Schedule E or any amount
included in your earned income. To find out if the income on line 26 or line 40
of Schedule E is from a passive activity, see the Schedule E instructions. If
any of the rental real estate income (or loss) included on Schedule E, line 26,
is not from a passive activity, print "NPA" and the amount of that income (or
loss) on the dotted line next to line 26.

taxmap/pubs/p596006.htm#en_us_publink1000297665Worksheet 2. Worksheet for Line 4 of Worksheet 1Complete this worksheet only if Form 8814 includes an Alaska Permanent Fund
dividend.
Note. Fill out a separate Worksheet 2 for each Form 8814.
  
1.  Enter the amount from Form 8814, line 2a  1.  
2.  Enter the amount from Form 8814, line 2b  2.  
3.  Subtract line 2 from line 1  3.  
4.  Enter the amount from Form 8814, line 1a  4.  
5.  Add lines 3 and 4  5.  
6.  Enter the amount of the child's Alaska Permanent Fund dividend  6.  
7.  Divide line 6 by line 5. Enter the result as a decimal (rounded to at least three
places)  7.  
8.  Enter the amount from Form 8814, line 12  8.  
9.  Multiply line 7 by line 8  9.  
10.  Subtract line 9 from line 8. Enter the result on line 4 of Worksheet
1  10.  
 (If filing more than one Form 8814, enter on line 4 of Worksheet 1 the total of the amounts on line 10 of all Worksheets 2.)
  
taxmap/pubs/p596006.htm#en_us_publink1000297666Example—completing Worksheet 2.
Your 10yearold child has taxable interest income of $400, an Alaska Permanent Fund dividend of $1,000, and ordinary dividends of $1,100, of which $500 are qualified dividends. You choose to report this income on your return. You enter $400 on line 1a of Form 8814, $2,100 ($1,000 + $1,100) on line 2a, and $500 on line 2b. After completing lines 4 through 11, you enter $400 on line 12 of Form 8814 and line 21 of Form 1040. On Worksheet 2, you enter $2,100 on line 1, $500 on line 2, $1,600 on line 3, $400 on line 4, $2,000 on line 5, $1,000 on line 6, 0.500 on line 7, $400 on line 8, $200 on line 9, and $200 on line 10. You then enter $200 on line 4 of Worksheet
1.