Income Credit – Killer Information On Earned Income Credit
There are certain low-income workers eligible for a refundable credit on their tax returns. The credit claimed depends upon whether the individual has one or more than one, or no qualifying children.
Calculating The Earned Income Credit
The amount of the credit is calculated as it follows. Take the taxpayer’s earned income and multiply by the credit rate.The credit is characterized by a three-stage structure that consists of phase-in, plateau, and phase-out.Size of credit (tax year 2009)
Earned income (x) | Stage | Credit (3+ children) |
---|---|---|
$0-$12,570 | Phase in | 45% * x |
$12,570-$16,420 | Plateau | $5,657 |
$16,420-$43,279 | Phase out | $5,657 – 21.06% * (x – $16,420) |
>= $43,279 | No credit | $0 |
Earned income (x) | Stage | Credit (two children) |
$0-$12,570 | Phase in | 40% * x |
$12,570-$16,420 | Plateau | $5,028 |
$16,420-$40,295 | Phase out | $5,028 – 21.06% * (x – $16,420) |
>= $40,295 | No credit | $0 |
Earned income (x) | Stage | Credit (one child) |
$0-$8,950 | Phase in | 34% * x |
$8,950-$16,420 | Plateau | $3,043 |
$16,420-$35,463 | Phase out | $3,043 – 15.98% * (x – $16,420) |
>= $35,463 | No credit | $0 |
Earned income (x) | Stage | Credit (no children) |
$0-$5,970 | Phase in | 7.65% * x |
$5,970-$7,470 | Plateau | $457 |
$7,470-$13,440 | Phase out | $457 – 7.65% * (x – $7,470) |
>= $13,440 |
Earned Income Credit Eligibility
In order to be eligible for a refundable credit, an individual must have a qualifying child or meet other requirements.To claim this credit an individual must not be claimed as a dependent and must be over the age of 24 and under the age of 65.When filing the income returns it is required to include the name and age of each qualifying children. It is also required to provide their taxpayer identification number and their spouse’s taxpayer identification number.
Applying For Earned Income Credit
When applying for the earned income credit, for the purpose of the EIC phase-out, you need to include in the adjusted gross income any nontaxable distribution of IRAs, pensions, annuities and tax exempt interest, as well as an add back of 75% of business losses.
You Can Get Refunds Claiming The Earned Income Credit
The earned income credit is a form of negative income tax, a refundable credit for lower income workers or for taxpayers who do not have a tax liability.We can assist you in determining your earned income tax credit. Call us now at 713 774 4467!