Income Rules

• To qualify for the EIC, says the Internal Revenue Service (IRS), you must have taxable earned income from an employer or taxable net earnings from self-employment. If you are married filing jointly, at least one spouse must have earned income. But there are maximum limits on the income you can earn based on your marital status and number of dependent children. If your earnings exceed the limits, you will be disqualified from taking the EIC.
  
  

Income Limits

• The 2010 income limit for a single person with no children is $13,460. For a childless married couple filing jointly, the limit is $18,470. The limit for a single parent with one dependent child is $35,535, rising to $40,545 for a married couple with one child filing jointly. A single parent with two children can earn up to $40,363, while a married couple with two children can earn up to $45,373. A single parent with three or more children can earn up to $43,352. A married couple with three children can earn up to $48,362. These limits may be different in future tax years.
  
  

Income Disqualifications

• Even if your total earned income is within the limits, you will still be disqualified for the EIC if you earned income from non-U.S. sources. You also will be disqualified if you had more than $3,100 of investment income. Some taxable income can't be counted as earned income, such as interest, dividends, pensions, Social Security and unemployment compensation. Money earned by prison inmates for performing work doesn't count for the earned income test. Any income that's tax exempt doesn't count as earned income.
  
  

Other Restrictions

• Regardless of income, you won't be able to claim the EIC if you don't meet certain non-income eligibility tests. A single, childless taxpayer can't claim the EIC if he's under age 25. A childless married couple must have at least one spouse over age 25 to claim the EIC. Married taxpayers who file separately can't claim the EIC. Your child must meet the qualification tests to be claimed as your dependent and can't be claimed as anyone else's dependent or qualifying EIC child. Similarly, you can't be claimed as another person's dependent or qualifying EIC child for his earned income credit.