Thursday, November 19, 2015

2016 Earned Income Tax Credit (EITC or EIC)

The 2016 earned income tax credit is changing every year due to inflation and other considerations. Below is information related to the amount of the 2016 earned income tax credit:

2016 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates

To qualify for 2016 earned income tax credit, your income must be below:
If filing...Qualifying Children Claimed
ZeroOneTwoThree or more
Single, Head of Household or Surviving Spouse$14,880$39,296$44,648$47,955
Married Filing Jointly$20,430$44,846$50,198$53,505

Investment income must be $3,400 or less for the year to qualify for the 2016 earned income credit

The Earned Income Tax Credit, EITC or EIC as it is commonly know, is a tax benefit for working people with low to moderate income. It essential boosts their income by providing a refundable tax credit based on their income. Remember that you must have a job or other earned income in order to qualify for this tax credit. The government does not want encourage people not to work and to rely on government welfare by collecting this tax credit. Thus, there are certain income thresholds you must meet, but also certain income limitations which will prevent someone from claiming the earned income tax credit if they are making too much money. 

To qualify for the earned income tax credit, taxpayers must meet certain requirements and file a tax return with IRS, even if you do not owe any tax or are not required to file a tax return. This is very important because many people do not file a tax return and then forgo the EITC when they would have otherwise qualified for it.  For most people, the EITC reduces the amount of tax you owe and may give you a refund.

Maximum Amount of Earned Income Credit in 2016

The maximum amount of the EITC credit for Tax Year 2016 is:
  • $6,269 with three or more qualifying children
  • $5,572 with two qualifying children
  • $3,373 with one qualifying child
  • $506 with no qualifying children

It will be very important to check with a tax preparer for more information. The IRS also has more information on claiming the earned income tax credit in 2016 on their website.

You need to file a tax return to claim EITC.

Find out:
  • the documents you need
  • the common errors to watch for
  • the consequences of filing an EITC return with an error
  • how to get help preparing your return
  • what you need to do if your EITC was denied in a previous year
  • how to claim the credit for earlier tax years

Important to remember that the 2012 American Tax Relief act extended the relief for married taxpayers claiming the EITC. This new tax expanded tax credit for taxpayers with three or more qualifying children and other provisions to December 31, 2017. Future laws could always change how the credit will apply to different taxpayer situations.

Remember that this information is about the 2016 EITC (for taxes filed in 2017) and uses figures recently released by the IRS. Always confirm all information with the IRS or a tax preparer


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