Do you qualify for an earned income tax credit?

You may be missing out on one of the most beneficial tax credits for families with low or moderate incomes — the earned income tax credit (EITC). The EITC reduces the amount of tax you may owe and may give you a refund. Do you qualify for this tax-saving credit?

How do I know if I qualify for the earned income tax credit?

Taxpayer situations and tax laws change from year to year. As a result, your eligibility for the EITC may change due to unemployment, loss of income, receipt of additional income, a change in marital status, or a change in a spouse’s employment situation. Check with your tax professional or use the earned income tax credit calculator (EITC Assistant) to see if you qualify.

To be eligible for EITC, you must:

• File as single, widowed, head of household or married filing jointly.
• Have a valid Social Security number. If filing as married filing jointly, your spouse must have a valid Social Security number, as must any qualifying dependent children you plan to claim.
• Be age 25 or older, but younger than 65.

The IRS has guidelines around what income types qualify for the EITC. This includes wages, salaries, tips and other taxable employee pay such as net earnings from self-employment or a business. If you received income from investments including stock dividends, rental income or inheritances greater than the IRS limits for the tax year, you typically will not qualify for the EITC. Some types of income that do not count as earned income or investment income include child support, pension income, Social Security benefits (if not taken early) and alimony.

Preparing your taxes

If you use a qualified tax software system to prepare your taxes, it will ask you the right questions to help you maximize all available credits — including the EITC. Plus, you minimize your margin of error over using a pencil and paper. If you use TurboTax to prepare your taxes online, you can receive an LGFCU member discount.

For basic tax preparation needs, do it yourself using Free File, the IRS’ online tax preparation site.