Tax Strategies & Credits

Taking the Credit You Deserve - What You Need to Know About the Earned Income Tax Credit

Taking the Credit You Deserve - What You Need to Know About the Earned Income Tax Credit

The Internal Revenue Service is working hard to raise awareness of recent changes that have made many more low-to-moderate income Americans eligible for the Earned Income Tax Credit (EITC). This refundable tax credit created as part of a robust anti-poverty program can mean as much as $1,502 for filers with no qualifying children and as much as $6,728 for married couples filing jointly with three or more children. The upper-income level for such a family is $57,414.

Many Americans opt-out of filing a tax return based on their low income precluding a tax liability, but the IRS is encouraging those people to file a return anyway, as the expansion of the EITC and other credits may mean that they have money coming to them in the form of a credit.

The EITC is available to people who have earned income through employment or other sources up to a specific threshold level. Neither the Child Tax Credit nor the government’s Economic Impact Payments count as income for EITC purposes, and as much as $10,000 in income from investments counts. IRS Commissioner Chuck Rettig said, "There are important changes to EITC that will help this credit reach more hard-working families this year. We urge people potentially eligible for this valuable credit to review the guidelines; many people each year overlook this and leave money on the table.” Taxpayers who may be eligible for the EITC include:

  • Those without children, including workers who are at least 19 years old and older than 64
  • People with disabilities or who provide care for a disabled dependent
  • Those living in non-traditional families, such as a grandparent raising a grandchild
  • Native Americans
  • Those who are members of the armed forces
  • Those earnings declined or whose marital or parental status changed
  • People living in rural areas
  • Those with limited English language skills

The agency is working to raise awareness of the increased availability of the Earned Income Tax Credit. Historically as many as one in five taxpayers eligible for the credit have not claimed it or received the refund to which they are entitled, though for tax year 2020 over 25 million families took advantage of the credit, receiving an average of $2,411 per family and over $60 billion in total to help pay for necessities.

There are several impactful changes in effect for the 2021 tax year, including:

  • The ability to use higher pre-pandemic income levels from 2019 instead of from 2021 in order to receive a larger EITC credit.
  • The maximum credit for childless workers and couples has tripled.
  • The EITC for childless individuals is now available to those who are at least 19 years old with earned income below $21,430 ($27,380 for married filing jointly). The minimum age was previously 25.
  • The upper age limit of 64 that was previously in place for claiming the EITC has been eliminated.

With tax season now underway the IRS has already processed a large number of returns and millions of dollars in refunds have been issued.

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Spencer Wilson

Spencer Wilson

Spencer Wilson, EA is a tax preparer based in Long Beach, CA. Spencer Wilson Financial Management Services has been serving the Greater Los Angeles Area and Orange County since 2004. <br /> We began in the heart of Naples in Long Beach and we continue to work hard offering tax preparation and planning, business accounting and bookkeeping and payroll services . <br /> We have helped many different people and businesses succeed financially and take control over their finances.

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