What Is the Earned Income Credit?

• The earned income tax credit is a credit available to certain taxpayers who meet eligibility requirements. All taxpayers must have earned income from a job, self-employment or another source that is considered earned income. Aside from the income test, a taxpayer must either have a child that meets the qualifying child test or the taxpayer must meet the criteria for taxpayers without a qualifying child. In the absence of a qualifying child, the taxpayer (and spouse if applicable) must have lived in the United States for over half the year, must both be over the age of 25 and under the age of 65 and not be eligible to be claimed as a dependent on another taxpayer's tax return.
  
  

Qualifying Child

• If a taxpayer is hoping to gain the benefit of the earned income tax credit based on a child then the first step is to determine that the child is qualifying child. First, a qualifying child must be a son, daughter (step, adopted or foster included) or a brother or sister or descendant of any of the above. The child must be younger than the taxpayer and younger than age 19 unless he is a full-time student in which case he must be younger than 24. The age requirement does not qualify if the child is permanently and totally disabled. The child must have lived with you in the United States for more than half the year, and the child may not be filing a joint return for the same tax year.
  
  

How to Determine Eligibility

• The Internal Revenue Service offers an easy earned income tax credit assistance program on its website that can help taxpayers determine if they are eligible for the earned income credit (see Resources). Note that in under no circumstances may the same child qualify more than one taxpayer for the credit.
  
  

Amount of the Credit

• The amount of the credit is determined by the number of qualifying children, if any, and the taxpayer's income for the year. There is a minimum and maximum income amount that qualifies a taxpayer for the credit. The maximum credit is found in the middle of those two figures. For instance, for the year 2011 the maximum earned income for a taxpayer with one qualifying child was $36,052 and the maximum credit amount under the same circumstances was $3,094.