Let’s Break Out the Cake for Tax Credits

Your Guide to State, Local, Federal, Estate + International Taxation

What were you doing on January 29th? If you’re like me, you’re always looking for a reason to celebrate (and eat cake)! If you weren’t celebrating, you should have been, because it was the 10th anniversary of EITC Awareness Day – a nationwide effort to alert millions of individuals who may be missing out on this significant tax credit!

What is the EITC?

The EITC, or the Earned Income Tax Credit, is designed to assist low and moderate-income workers and incentivizes the work that they do. The tax credit was first proposed by President Ford in the early 1970s and was later expanded by President Reagan, who referred to it as “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress”. Last year, more than 27.5 million eligible workers and families received almost $66.7 BILLION in EITC!

Do you qualify for the EITC?

  • You, and any spouse or qualifying children, must be a U.S. resident or resident alien for the entire year
  • You must also have valid Social Security numbers (or Taxpayer Identification numbers)
  • You must earn $3,400 or less in Investment Income
  • You cannot be a dependent of another Taxpayer

2015 Tax year- earned income and AGI (Adjusted Gross Income) must be less than:

If single, head of household, or widowed:

  • $14,880 with no qualifying children
  • $39,296 with one qualifying child
  • $44,648 with two qualifying children
  • $47,955 with three or more qualifying children

If married filing joint:

  • $20,430 with no qualifying children
  • $44,846 with one qualifying child
  • $50,198 with two qualifying children
  • $53,505 with three or more qualifying children

The maximum amount of credit available:

$506 with no qualifying children
$3,373 with one qualifying child
$5,572 with two qualifying children
$6,269 with three or more qualifying children

Some things to remember:

  • If you are a member of the Armed Forces, you can elect to treat combat pay (usually excludable from gross income) as earned income for the purpose of claiming the EITC.
  • Get it right! Taxpayers are responsible for the accuracy of their tax return, even if someone else prepares it for them. If you are not sure about your eligibility, we urge you to contact a tax professional.
  • Beware of scams! Beware of any scams that claim to “increase” the EITC by creating qualifying children or changing your income level to get a higher credit. Errors can have a lasting impact on your future eligibility for this tax credit.

So remember when EITC Awareness Day comes around next year, celebrate, eat some cake, and enjoy this awesome tax credit!

By Brandi Seymour, Tax Intern