Topic: TaxesWho is affected: Consumers at every life stageDEGREE OF DIFFICULTY: ModerateWhat you'll need: Annual income figuresWhat you need to knowThe earned income tax credit, or EITC, is a way for the IRS to reward work and offset the burden payroll taxes put on moderate- and low-income workers.How big a credit you qualify for, if any, depends on three main criteria: your income, your filing status and the number of dependent children you have.For 2008, income limits for the EITC are:Single filers with no children: $12,880.Married couples filing jointly with no children: $15,880.Single filers with one child: $33,995.Married couples filing jointly with one child: $36,995.Single filers with two or more children: $38,646.Married couples filing jointly with two or more children: $41,646.In addition to the income test, there are a few other rules for EITC qualification:Filers must be at least 25 but younger than 65 by the end of the tax year.Filers cannot be claimed as a dependent on someone else's returnChildren claimed on one tax return cannot be claimed as dependents by anyone else.Filers must reside in the U.S. for more than half the year.The EITC works on a sliding scale determined by income and the number of dependent children you have. The maximum credit you can get on a 2008 tax return is $438 with no children, $2,917 with one child, $4,824 with two children.Step-by-stepYou can use Bankrate's Earned Income Tax Credit calculator to find out whether you qualify for the EITC. Calculating the exact amount of your credit is tricky to do on your own. The IRS sponsors local low-income tax clinics, or LITCs, to help taxpayers fill out their return and claim the EITC.The agency's Web site has a list of clinics that are currently operating.If there's no clinic in your area or you'd rather file online, the IRS has partnered with tax software companies to form the Free File Alliance, which allows households earning less than $54,000 to prepare their taxes electronically (including determining their EITC) and file for free online.Related linksTools & resourcesTipsHelp for low-income taxpayersFile online returns for freeEarned income tax credit could pay offTempting the tax auditor10 ways to spend your tax refundEarned Income Tax Credit Calculator1040 tax calculatorVideo: Free tax helpVideo: Most common tax mistakesHandy tax tablesOne hazard of claiming the EITC is that it can result in an increased chance of being audited by the IRS. To minimize the risk, make sure all the Social Security numbers for all listed dependents are correct and that you keep all related documents close at hand in case the IRS comes calling. advertisementRelated Links:Parents' mortgage gift may trigger taxWho can help with a like-kind exchange?Paying taxes and fees with IOUsRelated Articles:Interest on EE bondsUpgrade home, get tax breakReporting LLC losses
How big a credit you qualify for, if any, depends on three main criteria: your income, your filing status and the number of dependent children you have.
For 2008, income limits for the EITC are:
In addition to the income test, there are a few other rules for EITC qualification:
The EITC works on a sliding scale determined by income and the number of dependent children you have. The maximum credit you can get on a 2008 tax return is $438 with no children, $2,917 with one child, $4,824 with two children.