Want to get more money in your tax return? Do you have some dependents and/or children? Then you might qualify for a big boost due to the Earned Income Tax Credit.
What The Credit Does
Earned income tax credits are written in at line 64a and 64b of form 1040, the most common form. They are a dollar-for-dollar reduction in your tax liability. For example, if you owe $10,000 in taxes based on the calculations in form 1040, and have paid $10,000 in taxes according to your W-2s but have a $3,000 earned income tax credit, then the amount of taxes you owe is reduced to $7,000 and you are entitled to a $3,000 refund.
Do You Get A Credit?
Did you earn less than $51,567 in 2013? If so then it’s worth looking up this credit. You need to meet some basic needs of citizenship, basically the same ones you need to file taxes. If you have dependents under the age of 19 (adopted or biological children or grandchildren usually), you can claim up to three qualifying dependants. You cannot file as “married filing separately” to receive the credit, you can file as single, married filing jointly, head of household or widow(er).
The Amount of Credit
Your credit is based on your income, filing status, and number of children and can be looked up in the Earned Income Tax Credit table starting on page 59 of the 2013 form 1040 instructions. For instance, if you earned $10,000 in 2013, are filling as single with 1 qualifying child then your credit is $3,250. There is a long worksheet starting on page 56 of the 2013 form 1040 instructions, but you can simply look up your income, filing status, and number of children in the table and if the table gives you a $0 credit then you know you don’t qualify. For example if you are single, earned 20,500 on your W-2, and have 0 dependents, then the table returns a value of $0 for you, indicating you don’t get a credit without the trouble of going through the worksheet.
The earned income tax credit is meant to reduce the effects of poverty significantly, particularly for families with children and also as a counterbalance to social security payroll taxes. The government modifies the table frequently and there have been recent increases in credits that are set to phase out in 2017. Make hay while the sun shines and get your credit now, this year, while the benefits are still relatively generous.