How Much Earned Income Credit Will I Receive?
The Earned Income Tax Credit is a refundable tax credit on your federal taxes. This means that when the credit amount exceeds your taxes owed, you are refunded the extra amount of the credit. It creates additional income for moderate- and low-income working families. The credit was created in 1975 to help offset the effect of Social Security taxes on paychecks.
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Qualifying Child
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Your earned income tax credit will be greater if you have qualifying children. A qualifying child must be younger than the tax filer unless the child is permanently and totally disabled. The qualifying child can't file his own joint return unless it is a claim for a refund by the child and the child's spouse. If the parent of a child doesn't claim the child as a qualifying child for the earned income tax credit, no one else can either. The only exception would be if the person trying to claim the qualifying child has a higher adjusted gross income than the child's parents. If you don't have a qualifying child, then you must be at least 25 years old but under 65 years old. You can't be claimed as a dependent or qualifying child of anyone else.
Other Limitations
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You must have a valid Social Security number and be a U.S. citizen or resident alien in order to get any earned income tax credit. You cannot receive a credit if you file your tax forms as married filing separately. You must have earned income, but your investment income must be less than $3,100. Finally, you cannot be filing Form 2555 or Form 2555-EZ. All of these conditions must be met in order to be eligible to receive the earned income tax credit.
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Income Limits
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Once you meet the eligibility requirements and determine how many qualifying children you have, you will be able to determine the amount of your earned income tax credit. In order to get the credit, you will need to file a Form 1040 tax form. You will determine your adjusted gross income when filling out this form and your earned income tax credit will be based on your adjusted gross income. In 2010, the income limits were: $43,352 ($48,362 married filing jointly) with three or more qualifying children ; $40,363 ($45,373 married filing jointly) with two qualifying children; $35,535 ($40,545 married filing jointly) with one qualifying child and $13,460 ($18,470 married filing jointly) with no qualifying children. These limits reflect increased amounts for people with three or more children and many of the married couple's limits.
Credit Limits
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In 2010, the maximum earned income tax credits were: $5,666 with three or more qualifying children; $5,036 with two qualifying children; $3,050 with one qualifying child and $457 with no qualifying children . The more your adjusted gross income is below the income limit for your number of qualifying children, the closer your credit amount will be to the maximum amount.
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References
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