The Earned Income Credit (EIC) is a valuable credit for lower-income taxpayers who work. It can be worth up to $4,716 for 2007, depending on your filing status, income, and the number of qualifying children involved. The EIC is refundable, which means that you can receive the credit as part of your refund, even if your tax has been reduced to zero.
You can qualify for the EIC even if you don't have any qualifying children, but the rules are slightly different than for those with qualifying children. We’ll look at the rules for taxpayers with and without qualifying children, and then we’ll discuss additional rules that apply to both.
To qualify for the EIC, taxpayers who don't have qualifying children must:
Be at least 25 years old but younger than age 65 on January 1, 2007
Not be able to be claimed as a dependent on another taxpayer’s return
Live in the United States for more than half the year
Have earned income and adjusted gross income (AGI) of less than $12,590 ($14,590 if married filing jointly)
To qualify for the EIC, taxpayers with 1 or more qualifying children must:
Have a qualifying child who meets the relationship, age, and residency tests:
The child must be your child, stepchild, foster child, sibling, half brother or sister, step brother or sister, or a descendent of any of them (for example, a grandchild or your niece).
The child must be under age 19, a full-time student under age 24, or disabled at the end of 2007.
The child must have lived with you in the United States for more than half of 2007.
Have a qualifying child who is not used by more than 1 person to claim the EIC
Have earned income and AGI less than:
$33,241 ($35,241 if married filing jointly) with 1 qualifying child; or
$37,783 ($39,783 if married filing jointly) with 2 or more qualifying children
To qualify for the EIC, all taxpayers must:
Have a valid Social Security number (SSN)
Not use the married filing separately (MFS) filing status
Be a U.S. citizen or resident alien all year
Not file a Form 2555 or Form 2555-EZ
Have investment income of $2,900 or less
Not be a qualifying child of another taxpayer
If you meet the qualifications, TaxCut will handle the calculations for you. For more information, see Publication 596: Earned Income Credits.