The earned income credit, or EIC, is a tax credit designed specifically for low-income workers. While the credit itself varies with family size, income level and the number of children in the home, even individuals who don’t earn enough to pay taxes can qualify for EIC.
During the 2010 tax year that maximum EIC for either a couple or individual without children was $457. The amount goes up to $3,050 with one child, $5,036 with two children, and if the couple or individual has three or more children the credit maxes out at $5,666. While the original EIC was fairly small, it has been expanded over the years several times.
The EIC is considered one of the more powerful tools used by the government to fight poverty in the country. Furthermore economists have expressed that they feel that every dollar which reaches low to moderate income families actually goes 50%-100% further when considering its impact on the local economy.
To claim EIC filers must fill out and include a Schedule EIC to their income tax forms. The form establishes age, relationship, residence and more. Sometimes older children, between the ages of 19 and 23 continue to qualify if they are full time students or if they are classified as disabled during the previous year.
Other stipulations include the level of investment income the claimant managed to set aside during the year. Citizenship, or resident alien status, of both the claimant and the child are also part of the equation, and a social security number is required.