When it comes to anything related to taxes, the majority of taxpayers tend to believe it will have a negative impact on them. However, the Earned Income Tax Credit is an exception to this rule. Designed to help lower-income individuals and families, its goal is to create larger tax refunds for those who need money the most. The amount of the credit can vary depending on such factors as income level and number of dependents, and it is capable of generating a tax refund that may be greater than the overall amount of taxes paid through withholding.
Though helpful to both individuals and families, the EIC is geared mainly toward families. Originally the credit was designed to max out at two dependents, but a change in the tax code through 2017 allows it to be used for families with three or more dependents.
Eligibility for the EIC is based on a combination of earned income and adjusted gross income, with the amount of the credit a taxpayer is eligible for being dependent upon the earned income and how many children in the household are being supported by the taxpayer.
For 2015, the maximum Earned Income Credit is as follows:
–$6,242 for families with three or more children
–$5,548 for families with two children
–$3,359 for families with one child
–$503 for individuals with no children
For 2014, the amounts are:
–$6,143 with three or more children
–$5,460 with two children
–$3,305 with one child
–$496 for individuals
Maximum income levels vary from $14,820 for individuals to $47,747 for families with three or more qualifying children. In addition to these requirements, all taxpayers who believe they are eligible for the EIC must have a valid Social Security number, be a U.S. citizen or resident alien, cannot use the married filing separately filing status, cannot be claimed as a qualifying child by another taxpayer and be between the ages of 25-64.