Earned Income Tax Credit (EITC)

The Earned Income Tax Credit is a federal tax credit that helps low-income people who are working, especially those who are raising children. If you get it, you will either get a larger refund (money given back to you) or pay less in federal taxes.

The EITC is administered by the United States Internal Revenue Service.

Most people who get the EITC get a refund. The largest refund you can get from the EITC for Tax Year 2012 is $475 (with no children), $3,169 (if you have one child), $5,236 (if you have two children) or $5,891 (if you have three or more children).

The EITC is mostly for working parents (or others such as grandparents, relatives or foster parents) who are raising one or more children. There are also rules about which children count for the EITC (see the next question). Some people who are not raising children, but who work can also get the EITC (see Questions 6). Your income from work has to be below the limits to get the EITC. (See Question 27 for the income limits.) Lots of people who can get the EITC do not get it because they do not file their taxes. They miss out on money that is meant for them.

Children who count for you to get the EITC are called “qualifying children.” To be a qualifying child, a child has to be:

• A son, daughter, adopted child, foster child placed by an agency, grandchild, stepchild, brother, sister, stepbrother, stepsister (or a descendent of any of these), who lived in your home for at least six months during the past year.
• Under age 19, or under age 24 if a full-time student. Totally and permanently disabled children can be counted at any age.

Beginning in tax year 2009:

The change in the Uniform Definition of a Child adds two new rules to the definition of a “qualifying child.” The child must:

• Be younger than the person claiming the child
• Not have filed a joint return other than to claim a refund

A child has to live with you at least 6 months of the year to count for the EITC. If a child’s parents do not live together, only one of them can count (or claim) a child for the EITC. If a child lives with you half of the year and another parent or person half of the year, there is a “tie-breaker rule” that says who can claim the child. This rule says that if more than one person can claim a child, but only one of them is the child’s parent, then the parent gets to decide who can claim the child. If both parents lived with the child for the same amount of time (six months each), then the parent with the highest income decides who can claim the child. If children spent part of every week with one parent, and the other part with the other parent, you should count up the number of days the child spent with each parent.

Yes. Single adults or couples who are not raising children, but who are working can also get a smaller EITC. Adults without children have to be at least 25 years old and under 65 years old to get the EITC. The income limits to get the EITC are much lower for people who are not raising children. (See Question 27 for the income limits.)

You can only get the EITC if you file your taxes (or have someone file them for you). If you pay someone to do your taxes, it will probably cost you $120 or more. There are also free tax preparation sites throughout Minnesota. Trained, professional volunteers at these sites will prepare your taxes at no cost to you. To find a free tax site in the metro area visit AccountAbility Minnesota's website, for free tax sites in Greater Minnesota click here,  or call United Way 2-1-1 by dialing 2-1-1 (651-291-0211 for cell phone users). Some of the sites are open year-round.

Yes. Married couples cannot get the EITC if they file separately. If you have your taxes done for you, your preparer will know how to do this.

Yes. For Tax Year 2012, if you have more than $3,200 in investment income in one year, you cannot get the EITC. Other assets such as money in a checking or savings account or other items you own do not matter for the EITC.

No. Legal immigrants can also get the EITC, but you have to have a Social Security Number (valid for work) for yourself, your spouse (if you have one) and your qualifying children to get it.

You can get the EITC even if you lived in a different state for all or part of the year. But, if you did not live in the United States for the whole year, you cannot get the EITC.

Yes. Even if you lived and worked only on the reservation, you can get the EITC. But you also have to meet the other guidelines for the EITC.

You can usually get your federal refund within 5-10 days of filing if you have a bank account and use direct deposit. If you don’t have a bank account, it will probably take 4-6 weeks to get your refund in a check.

There is no application because the EITC is not a program. To get the EITC, you have to file your federal income taxes.

No.

Because many Minnesotans with low incomes can get money back at tax time. If you do not file your taxes, you could miss out on lots of money.  Plus, you can get your taxes done for free at many places in Minnesota. To find a free location in the metro area visit AccountAbility Minnesota's website, for free tax sites in Greater Minnesota click here, or call United Way 2-1-1 by dialing 2-1-1 (651-291-0211 for cell phone users).

You can still get the EITC for up to three years before this tax year if you didn’t get it, but were supposed to get it. This is called “back-filing.” Your tax preparer can help you back-file if you need to.

There are several locations across Minnesota where you can get your taxes done for free. For AccountAbility Minnesota's free tax preparation sites click here. For other free tax preparation sites in Minnesota click here or call United Way 2-1-1 by dialing 2-1-1 (651-291-0211 for cell phone users).

If you pay someone to file your taxes, it will probably cost you at least $120, and it could cost much more. If you go to a free tax preparation site (VITA or AARP), you will not have to pay anything. For AccountAbility Minnesota's free tax preparation sites click here. For VITA or AARP tax preparation sites in Minnesota click here or call United Way 2-1-1 by dialing 2-1-1 (651-291-0211 for cell phone users).

It is helpful (but not required) to bring your tax return from last year. Also bring the following things:

• A picture ID.
• Cards showing Social Security Numbers or Individual Taxpayer Identification Numbers (ITINs). You will also need to know the birth dates for each member of your family.
• It is helpful to bring a copy of your tax return from last year. Taxpayers can file three years back for unclaimed tax credits.
• Direct deposit information (such as a check) showing your bank account and routing numbers.
• Year-end income statements showing income from all jobs or payments (W-2 or 1099 forms)
• Year-end income statements for MFIP, SSI, MSA, GA, Social Security payments, veteran’s benefits and worker’s compensation.
• If you have a child in school in kindergarten through grade 12, bring receipts that show the school expenses that you paid for. Examples of school expenses are pens, pencils, notebooks, folders, purchase or rental of an instrument used in school, music lessons, etc. (Optional)
• Tuition expenses you paid to attend a university or technical college (Form 1098-T). (Optional)
• Interest paid on student loans (Form 1098-E)
• Daycare expenses. Bring your provider’s name, address, and tax ID or Social Security Number. (Optional)
• If you are a renter, bring your Certificate of Rent Paid (CRP).
• If you are a homeowner, bring your statements showing mortgage interest and real estate taxes paid (Form 1098) and Property Tax Payable (mailed by the county in March). (Optional)
• Charitable donations. (Optional)
• If you have a small business, daycare, or self-employment income, contact the tax site to see what else you need to bring.

These are all names for loans that paid tax preparers offer their customers. If you get one of these loans, you can usually get your refund quicker, but these loans are very expensive. Usually the annual percentage rate (APR) is over 200%! That means you will lose a large part of your refund money if you take out one of these loans. If your refund is delayed for any reason, you will pay even more money for this loan. We recommend that you don’t take out a loan like this. If you can wait a couple weeks after you file, you will get all of the money that you are supposed to get.

Yes. The screening tool on this site can estimate the maximum EITC benefit that you could receive. This is an estimate of the maximum you might receive and there are other factors that could affect your eligibility, therefore it is likely you will receive less. Click here to use the screening tool to get an estimate of your benefit.

The EITC is never counted as income for government programs. But some government programs have asset tests that limit how much money or property families can have (such as money in a checking or savings account) and still be eligible. For most programs, the money from the Earned Income Tax Credit (EITC) is NOT counted as an asset during the month it was received and the following month. After that, the money could affect your eligibility for programs that have asset limits.

Some programs have different rules:

• For Supplemental Security Income (SSI) eligibility, money from the EITC is not counted as an asset for 9 months after you get it.
• For Food Support (Food Stamps) eligibility, money from the EITC is not counted as an asset for 12 months after you get it.
• Money placed in an Individual Development Account (IDA) is never counted toward asset limits.

No. The Advance EITC (AEITC) program was eliminated as of December 31, 2010. You can only receive your EITC refund in full after you file your taxes.

It is your income before taxes and deductions are taken out.

These types of income count as earned income for the EITC: Wages, salaries, self-employment earnings, tips, union strike benefits, and long-term disability benefits (if received before retirement). If you have nontaxable combat pay, you can decide if you want to count it as earned income. These types of income do not count as earned income for the EITC: Minnesota Family Investment Program, MSA, or General Assistance benefits, worker’s compensation, unemployment insurance benefits, alimony, child support, interest and dividends, Social Security and railroad retirement benefits, pensions and annuities, variable housing allowances for the military, and earnings for work done while in jail or prison.

To receive the EITC in Tax Year 2012 all of your earned income and adjusted gross income has to be below the limits. The limits are different for different groups of people.

For Single Parents:

• If you are a single parent raising one child, your earned income and adjusted gross income has to be below $36,920
• If you are a single parent raising two children, your earned income and adjusted gross income has to be below $41,952.
• If you are a single parent raising three or more children, your earned income and adjusted gross income has to be below $45,060.

For Married Parents Filing Jointly:

• If you are married and raising one child, you and your spouse’s earned income and adjusted gross income combined has to be below $42,130.
• If you are married and raising two children, you and your spouse’s earned income and adjusted gross income combined has to be below $47,162.
• If you are married and raising three or more children, you and your spouse’s earned income and adjusted gross income combined has to be below $50,270.

For Those Not Raising Children:

• For single adults, your earned income and adjusted gross income has to be below $13,980.
• For married adults, you and your spouse’s earned income and adjusted gross income has to be below $19,190.