The Earned Income Credit also known as the EIC credit is an amazing federal tax credit for the public. The credit is income based and helps low and medium income families out tremendously. The credit is a strategic economic move from the government to motivate the American people to work. The credit is only for EARNED income which means the tax payer with dependents must have income from a job or self employment in order to receive the credit.
Unemployment or any other UNEARNED income does not count for this credit. Therefore, the credit was put in motion to encourage working. The EIC credit has thresholds and maximums, limits, and is strategic to our countries economy.
The EIC has thresholds and maximums. If one has no kids then the earned income credit can be received if that person makes less than $ 14,340 (Joint $ 19,680). The maximum credit refundable is $ 487. If one has one dependent (under 17 years old) then they must make less than $ 37,870 (Joint $ 43,210). The maximum credit for them would be $ 3,250. One with two dependents that make less than $ 43,038 (Joint $ 48,378) would receive a maximum of $ 5,372. One with three or more dependents and make less than threshold $ 46,227 (Joint $ 51,567) would receive a maximum of $ 6,044. The amount that is given depends on your earned income. Think of the amount given as a bell shaped curve. The less you make the less you get. Then the maximum is received around the median, then the amount decreases as you get towards the threshold amount.
The EIC credit has a few limitations. First, you must be either Married filing Joint (MFJ), Head of Household (HOH), Qualifying Widow, or Single. You may not get the credit if you are married filing single. The IRS discourages MFS for economic reasons. Second, dependents must be under 18 (17 in tax year) or be a full time student up to 24 years old. Third, household members must have a valid social security number. Fourth, you must be a US citizen. Fifth, you must have earned income. Last, you can not be a qualifying child of somebody else aka nobody can claim you.
These requirements are set in stone and there is no going around them.
The strategic economics of the EIC credit. The reason (coupled stimulating work) for the EIC credit is it helps low to medium income families. It gives them a huge tax break and pretty much always results in a refund. The EIC credit is a economic strategy that promotes the US economy. The economy not only flourishes with the money that the tax payer spends, but also promotes work which boosts the economy.