The “Earned Income Tax Credit”

The “Earned Income Tax Credit” also-known-as the EITC is a credit meant to help those who make very little income. The government offers those cititzens a chance to keep a little bit of extra money in their pockets by lowering their tax obligations.

However, there are a few stipulations to receiving this credit. You must, of course, have a valid U.S. social security number and have earned income for the year, whether it be in self or regular employment. You must also be filing as an individual (those who are married but filing separately do not qualify) and not be claimed as a dependant on anyone else’s return. Most importantly, you CAN NOT file any forms having to do with foreign income, such as the 2555 or 2555-EZ.

You also must be within all of the EITC thresholds:

Earned income and adjusted gross income (AGI) must each be less than:

• $38,646 ($41,646 married filing jointly) with two or more qualifying children;
• $33,995 ($36,995 married filing jointly) with one qualifying child;
• $12,880 ($15,880 married filing jointly) with no qualifying children.

Tax Year 2008 maximum credit:

• $4,824 with two or more qualifying children;
• $2,917 with one qualifying child;
• $438 with no qualifying children.

Investment income must be $2,950 or less for the year.

The maximum Advance Earned Income Tax Credit for 2008 an employer is allowed to provide to employee’s pay is $1,750. (numbers from the IRS website)

There are so many different credits, make sure to check out which ones could save you.