Earned income tax credit

 

Today I wanted to talk about the Earned Income Tax Credit. It's geared toward working people with low to moderate incomes, and for some families, it can offer as much as $6,728 in cold hard cash. For whatever reason folks aren’t claiming this, so I’ll share what you need to do to claim in 2021. The most important aspect of the earned income tax credit is that it's a refundable tax credit. With most tax credits, if you don't owe taxes, then the credit ends up going unused. But as a refundable tax credit, the EITC is different. If you don't need to use your EITC to reduce your tax bill, then the IRS will actually cut you a check for the unused portion. That's unusual among tax credits, and it effectively makes the EITC a way that the federal government can get money to those who need it most – and have earned their right to receive it. To get the earned income tax credit, you have to meet several requirements. The most important one is that you need to have earned income from work, whether it's a traditional job or a side gig. If you run your own business, your net income also counts as earned income for EITC purposes. However, things like investment income, pensions, Social Security, or unemployment benefits don't count as earned income. There’re income limits and filing status and how many children that qualify, so you’d need to check on these criteria to see if you meet them. To claim your earned income tax credit, you have to file a federal tax return. That's the case even if your income is low enough that you ordinarily wouldn't be required to file. You can go to the IRS. gov website and they have all the information there or ask your tax person. Don’t leave this money on the table. There’s close to 30 million people who qualify and close to 6 million don’t claim this credit.