The Earned Income Credit, or EIC, or EITC, is a refundable tax credit that an individual can claim on a tax return. It mostly applies to low to moderate-income employees. Individuals who qualify for EIC can claim the credit to reduce the federal taxes they owe.
EIC does not require a person to be married or single or have a family. The main requirement of EIC is that a person must be an earning individual. If the amount of the EIC is more than the federal tax owed by a person, the money will be refunded to him. Even if the individual owes no income tax, they will still get a refund.
How Does the EIC Work?
EIC helps an individual financially by reducing their tax burden. But before applying for EIC, you must know a few things about how it works. Here are the facts:
In 2022, the range of earned income tax credit is set between $560 to $6935. The credit amount will be provided according to one’s tax filing status and the number of children.
EIC does not require having kids to become eligible for the benefit.
EIC not only reduces the amount of tax owed by an individual but also refunds the excess amount after paying the tax.
After clamming for the EIC, you must wait until mid-February for the refund.
Which Factors are Needed to Claim EIC?
If you satisfy specific requirements that are essential for the application procedure, the EIC program may consider your claim for benefits. These goals can be broken down into three categories: having children who are eligible, having a Social Security number, and providing facts about earnings. Take a look at these three aspects, which are discussed below.
You can work and submit claims for the EIC if you have a taxpayer identification number, also known as an SSN or Social Security Number. It is possible to apply for EIC even if you are not a citizen, provided you have a social security number. You won't be able to make a claim for federal EIC if you submit your taxes using your ITIN number.
2. Earnings Details
In order to be eligible for EIC benefits, an applicant is required to provide their earnings statement. That translates to the fact that it is an absolute necessity for a person to hold a job and bring in money for themselves. Your income can be any amount, and it can come from any source, including wages, tips, or salary. As long as you provide the details of your income, you will be eligible for the EIC claim even if your income is higher than the minimum.
In order to be considered a child that meets eligibility requirements for EIC under the child claim category, certain requirements must be completed, such as:
Relation: You are required to have a blood connection or any ties that prove your relationship with the child, such as being the child's parent, grandparent, half-sibling, step-sibling, or any other type of sibling relationship.
Living Period: The child must reside with you in the United States for at least six continuous months out of each year.
Age: The child can't be older than 19 years old. If the child is enrolled in school full time, then their age must be under 24, and if the child has a disability, then their age does not factor into the decision.
How Much Can an Individual Get as EIC?
The amount of money you can get as an EIC is determined by a few different things, such as your current income and family size. The highest credit range that can be obtained in 2022 is $6935. The amount of the credit will increase in direct proportion to the amount of earned income you have until it reaches the maximum allowable amount of $6935. In addition to this, it is generally accepted that larger families bring in more money.