Earned Income Credit

The Earned Income Tax Credit has undergone some changes this year.  The American Recovery and Reinvestment Act of 2009 expanded the credit to include more taxpayers.  To be eligible, a taxpayer must have earned income below a certain level.  A taxpayer must be a U.S. citizen or resident alien, and have a valid social security number.  This hasn’t changed, but what has changed are the phase outs and the number of children that are eligible.

One of the biggest changes this year is the inclusion of a third child for the credit.  This does a couple things for those parents who have more than two children.  First of all this change has increased the phase outs for those parents with more than three children.  Someone who may have not qualified before may now qualify to claim this credit.  The next thing this changes is that if you have more than two children the amount of your credit will increase.  Since this is a refundable credit this translates into many people receiving larger refunds.  If you have more than three children make sure you don’t miss out on this exciting change.

The next thing that has changed is the phase outs.  These are usually adjusted every year.  If you have no children and make less than $13,440($18,440 if married filing jointly) you may qualify.  If you have one qualifying child and make less than $35,463($40,463 if married filing jointly) you may qualify.  If you have two qualifying children and make less than $40,295($45,295 if married filing jointly) you may qualify.  And finally if you have three qualifying children and make less than $43,279($48,279 if married filing jointly) you may qualify.  If you have more than three children congratulations, but this credit maxes with three children. 

These are substantial enhancements to this credit.  However, these changes are only for 2009 and 2010.  After that the Earned Income Tax Credit reverts back to the old rules.  For additional information feel free to contact us.

The information contained on this site should in no way be considered to be professional advice in the form of either tax, accounting, or legal service or consultation. You should always consult with a professional familiar with your individual circumstances before making any specific decisions related to accounting, tax, or legal matters.