The Internal Revenue Service (IRS) released new guidance for the Earned Income Tax Credit (EITC) in the form of frequently asked questions (FAQs) on March 2, 2022. The EITC is considered one of the most significantly advantageous tax credits for low-to-moderate income families, with credits of up to $6,728 for families with three or more children. However, the new guidance allows for more taxpayers to qualify for the credit for the 2021 tax filing year even if they do not have qualifying children since the maximum credit has almost tripled for eligible taxpayers.
The most notable highlights in the FAQs include the following:
- For the 2021 filing year, taxpayers may calculate their EITC using their 2019 earned income if it was higher than their income in 2021.
- The EITC is generally available to taxpayers without qualifying children who are:
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- Individuals filing with income less than $21,430
- Spouses filing jointly with income less than $27,380
- The EITC is also available for taxpayers with qualifying children who have a valid Social Security number based on the following limits:
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- $42,158 ($48,108 filing jointly) for one child
- $47,915 ($53,865 filing jointly ) for two children
- $51464 ($57,414 filing jointly) for three or more children
- For the first time, and in 2021 only, the EITC has no age limit cap for eligible taxpayers who have no qualifying children. Previously, the ETIC was only available for taxpayers without qualifying children who were between the ages of 25 and 64. Those claiming the credit that are 18 or older should ensure they are not claimed as a dependent by another taxpayer, namely parents.
- The maximum EITC for taxpayers who have no qualifying children is $1,502 for the 2021 filing year.
- If the taxpayer’s investment income was $10,000 or less in 2021, you could be eligible for the ETIC.
- Students who are under the age of 24 without qualifying children may not claim the EITC unless they are:
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- Qualified former foster youth or qualified homeless youth who was at least 18 years old and satisfied other ETIC requirements
- Married specified student filing jointly with their spouse who is eligible for the ETIC
Windham Brannon’s team of tax professionals is available to answer your questions regarding EITC eligibility. For more information, reach out to your Windham Brannon advisor today, or contact Gary Gruner.
