- Congress enacted legislation in 1975 to provide qualified taxpayers with the EITC. The intent was to offer lower income families an incentive to substitute work for public assistance and to help offset the rising cost of Social Security taxes. The qualifications, income limitations and maximum credit have seen frequent revisions over the intervening years.
- Taxpayers must meet the minimum qualifications for the EITC. If they do, they compute the amount of the credit for their family size and income level. They transfer this number to their Form 1040. If the EITC is greater than the tax they owe, they receive a refund for the difference. Taxpayers must file a federal income tax return to receive the EITC even if they are not required to file a return for any other reason.
- The earned income and the adjusted gross income each have to be within the limits for the size of the family. For the 2010 tax year, these limits are $13,460 if single or $18,470 for joint returns if the taxpayer has no qualifying child. If there is one child, the limits are $35,535 for single filers and $40,545 for joint returns. The limits for taxpayers with two children are $40,363 for single filers and $45,373 if filing a joint return. If there are three or more children, the limits are $43,352 for single filers and $48,362 for joint returns. Regardless of family size, investment income for the year cannot exceed $3,100.
- For 2010, the maximum EITC is $457 if the taxpayer has no children and $3,050 if he has one child. Taxpayers with two children may receive a maximum of $5,036, while those with three or more may receive up to $5,666.
- All taxpayers must meet the basic qualifications for the EITC. You must have income earned through employment or self-employment and possess a legitimate Social Security number. Married taxpayers cannot file separate returns. No other taxpayer may claim you as a qualifying child. You must be a citizen of the United States, a resident alien for the entire year or a non-resident alien who is married to a resident alien or citizen. You cannot file either the Form 2555 or Form 2555-EZ for reporting foreign income. For joint returns, both spouses must meet the basic qualifications. Only one taxpayer may claim the same qualifying child.
- If you do not have a qualifying child, you must have resided in the U.S. for at least half of the year. For joint returns, both spouses must meet the residency requirement. You cannot qualify as someone else's dependent, nor can your spouse if you file jointly. If you are married and file a joint return, one of you must be between the ages of 25 and 64. A single filer must meet the age limits as well.