How to Calculate Earned Income Credit
The EIC (earned income credit) is for people who make less than $13,460 with no qualifying dependents and are filing single or less than $18,470 with no dependents and are filing jointly, and for those who have dependents to claim with larger adjusted gross incomes. If the IRS has not told you that you cannot claim the earned income credit and you have a valid Social Security number, you need to know how to calculate earned income credit to see if you qualify for a credit. In the instruction booklet, a questionnaire will help you determine if you can take the credit. If you answer the questions correctly and advance to the last step, you will need to calculate your credit.
- Difficulty:
- Easy
Instructions
Things You'll Need
- Federal instruction booklet
- Calculator
- Tax form 1040, 1040A or 1040EZ
-
How to Calculate Earned Income Credit
-
1
Answer the questions starting on Page 45 through Page 46. If you answer the questions and advance to the next section, you will find Step 5 of the earned income worksheet on Page 47. Answer the question as to whether you are a church employee. If you answer no to this question, enter your total income on Line 7 of your federal tax form.
-
2
Subtract any grants or scholarships that were not reported on a W-2, any income received if you were an inmate of a prison or any annuity or pension as instructed. Add your combat pay even if it is non-taxable, but you elect to claim it as earned income. If you enter combat pay on this line of the questionnaire, you will also enter than amount on line 64b of the tax form. Caution: Figure the earned income credit with and without combat pay to see which way will give you a bigger credit.
-
3
Take the total from this section and enter it the "Earned Income" box. Then answer questions 3 and 4 to move on to Step 6 if your earned income meets the standards for income in Question 4. Step 6 allows you to have the IRS figure your EIC, but you can do this by advancing to the form on page 49 if you are not a church employee or self-employed, or Page 50 if you work for a church or are self-employed.
-
4
Move down to page 49, worksheet A, to calculate EIC for someone who is not a church employee or self-employed. On Line 1, enter the amount in the earned income box from Page 47. Then look up the amount from Line 1 in the EIC table found in the instruction booklet starting on Page 52. Enter the amount from the EIC table in Box 2.
-
5
Enter the amount from Line 38 on the 1040 form in the box on Line 3. Question 4 asks whether the amounts on lines 1 and 3 are the same or different. If they are the same, enter the amount from Line 2 on Line 6 and on Line 64a of your federal 1040 and you are done. If you answer no, they are not the same, move to Question 5.
-
6
Answer Question 5 if you answered no for Question 4. This asks you whether you have qualifying dependents and whether the amount from Question 3 was less than $7,500 for singles or $12,500 for married couples filing jointly. Answer yes or no and then follow the instructions for filling in the amount on Line 6 and Line 64a on the federal 1040 form.
-
1
Tips & Warnings
When using the EIC table, make sure you get your credit amount from the right column.
If you are a church employee or were self-employed, use Worksheet B.
