Who doesn’t love a little extra from their tax refund? If you’re a parent who isn’t a high-income earner, you should definitely be familiar with the Earned Income Credit. PS: Even if you are a high earner, there are still ways to save on taxes.
What is the Earned Income Credit?
The Earned Income Tax Credit or Earned Income Credit (aka EIC) is a refundable tax credit created to reduce the amount of taxes you owe. Hello, bigger refund.Your credit amount depends on your filing status. And the number of dependents you have under the age of 19 (or up to age 24 if they’re a student.)
How do I know if I qualify for the earned income credit?
To qualify for the EIC, you’d have to earn a low to moderate income based on IRS guidelines. For the 2021 tax year, that means you’d have to have earned less than $57,414 to be eligible. Psst…your investment income can’t exceed $10,000. Other qualifications include being a US citizen and having a valid Social Security number. And if you have qualifying children or dependents, that increases the amount of credit you get.
Do newborn babies get earned income credit?
Yep. As long as they were born by December 31st in the same tax year. And you include their Social Security number on your tax return. Otherwise, your tax benefits will be disallowed. If your new baby arrives at 12:01 am, you have to wait until the following year to claim them on your taxes.
How much will I get from my earned income credit?
For the tax year 2021, $3,618 is the maximum credit you can expect if you have one child. Two qualifying children can earn you up to $5,980. Psst…even with no qualifying children, you can still earn up to $1,502. The IRS also offers an earned income tax credit calculator to help you figure out the exact amount you’ll receive.
As long as your newborn arrives within the tax year, you can claim them for the Earned Income Credit. And, no, you don’t need a dependent to qualify. But you would need to qualify as a low- or moderate-income earner.
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