Filing taxes doesn’t usually come at the top of people’s Favorite Things To Do list. It’s not all that bad, however, and in fact could bring some things to look forward to. Like the Earned Income Tax Credit (EITC).
Earned Income Tax Credit
The EITC or EIC is a refundable tax credit available to claimants that qualify as low- and moderate-income workers. Essentially, the benefits of an EIC claim go far and beyond simply getting a cut on what you owe in taxes. It can, in fact, also give you a refund that’s more than the actual amount you paid. An income tax calculator can break down the numbers. Simply put, it’s one of the easiest ways to save money on taxes, and then some.
How Do You Qualify for EITC?
According to the IRS, “you must meet certain requirements and file a tax return, even if you do not owe any tax or not required to file.” So keep in mind that filing a tax return is the first thing you should do before you can begin checking the boxes for the rest of the requirements.
What if you have personal loans that may be much bigger than your income? Are personal loans taxable? How can they impact your EITC claim?
Personal loans are not taxable because they are not earned money, and so do not qualify as income. So if you have an outstanding personal loan, you should not worry about it affecting your EITC claim.
What will impact your EITC, however, are your income and number of child dependents. Now, having a child is not necessarily a requirement for eligibility. Regardless of this fact, you can still file for a claim for earned income credit.
The important thing to note about this particular requirement, however, is that if you are without a child, then you must meet the corresponding requirements for that. If you do have a child, then your child must meet ALL the qualifying child rules in relation to the EITC claim.
Children and EITC Claims
Individuals without kids should have resided in the United States for over six months in the past year. Age of eligibility ranges from at least 25 to 64 years old at the end of the year. Also, you must not be identified as someone else’s dependent.
Meanwhile, if you do have children—whether biological, step, adopted, foster, or grandchild— they must be under 19 at the end of the year. Children who are full-time students must be under 24. Permanently and totally disabled children are exempt from the age limit.
Other individuals you can claim as your child can include your siblings, half or step-siblings, or even your niece or nephew from them.
Filing for Back Claims
What if you think you were eligible for EITC in the last three years, but didn’t file a claim? Simply inform the IRS about this oversight so they can process your claim. They will get in touch with you to confirm your claim’s approval.
If you think you check the boxes on each of these requirements, go ahead and make a claim for earned income tax credit the next time you file for tax returns. And one last thing for your information, the 2020 range for EITC is from $538 to $6,660. Now that’s something to look forward to in the next tax filing season. File that claim and see how much you can earn back.
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