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 Federal Credits
What is the Earned Income Tax Credit?
The Earned Income Tax Credit or the EITC is a refundable federal income tax credit for low to moderate income working individuals and families. If you’re like millions of Americans, you work hard but you don’t earn a high income and want to keep more of what you earn. The Earned Income Tax Credit also called EITC or more simply EIC is a credit for people who earn low-to-moderate incomes. EITC can reduce your taxes, and can mean a refund. In simple terms, working families and individuals keep more of what they earn. To qualify for Earned Income Tax Credit or EITC, you must have earned income from employment, self-employment or another source and meet certain rules. In addition, you must either meet the additional rules for Workers without a Qualifying Child or have a child that meets all the Qualifying Child Rules for you.
Filers must meet the following income limits. Earned income and adjusted gross income (AGI) must be less than:
- $43,998 ($49,078 married filing jointly) with three or more qualifying children
- $40,964 ($46,044 married filing jointly) with two qualifying children
- $36,052 ($41,132 married filing jointly) with one qualifying child
- $13,660 ($18,740 married filing jointly) with no qualifying children
2011 Investment income must be $3,150 or less for the year.
How much credit could a filer receive if they qualify for the EITC?
Tax Year 2011 maximum credit:
- $5,751 with three or more qualifying children
- $5,112 with two qualifying children
- $3,094 with one qualifying child
- $464 with no qualifying children
What is the federal Child Tax Credit?
The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence. To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010. They must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption. The child must not have provided more than half of their own support. The child must be a U.S. citizen, U.S. national, or U.S. resident alien. The child must have lived with you for more than half of 2010. The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
What is the Additional Child Tax Credit?
If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.
What is the Federal Child and Dependent Care Credit?
The Child and Dependent Care Credit is a federal tax benefit designed to assist families with the cost of care for children or other dependent relatives.
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