Earned Income Credit Definition and Eligibility Rules

The Earned Income Credit, or EIC, is a refundable tax credit available to working individuals and families with low-to-moderate incomes. Its purpose is to reduce the amount of federal tax owed. Because the credit is refundable, a recipient can receive a tax refund even if they do not owe any income tax. This financial support is designed to assist with the costs of living and encourage workforce participation. The ability to claim the credit depends on several factors determined by the Internal Revenue Service.

Core Eligibility Requirements

To qualify for the Earned Income Credit, every individual on the tax return must have a Social Security Number (SSN) that is valid for employment. This includes the primary taxpayer, their spouse if filing jointly, and any child claimed for the credit. The SSN must be issued on or before the tax return’s due date, including extensions. An Individual Taxpayer Identification Number (ITIN) cannot be used in place of a valid SSN for this credit.

A taxpayer’s filing status affects eligibility. The credit can be claimed by those using the Married Filing Jointly, Head of Household, Qualifying Widow(er), or Single filing statuses. Individuals who use the Married Filing Separately status are not eligible, though a limited exception exists for separated spouses who meet specific IRS criteria.

A taxpayer must be a U.S. citizen or a resident alien for the entire tax year. Their main home must also have been in the United States for more than half of the year. If a taxpayer or their spouse was a nonresident alien for any part of the year, they can only claim the EIC if they file a joint return and meet other specific requirements.

Qualifying Child Rules

For a child to be a qualifying child for the Earned Income Credit, they must meet four specific tests:

• Relationship: The child must be the taxpayer’s son, daughter, stepchild, eligible foster child, or a descendant of any of them, such as a grandchild. The definition also includes the taxpayer’s brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them, like a niece or nephew.
• Age: At the end of the tax year, the child must be younger than the person claiming them and either under age 19 or a full-time student under age 24. There is no age limit for a child who is permanently and totally disabled. A person is a full-time student if enrolled for the number of hours the school considers full-time for at least five calendar months.
• Residency: The child must have lived with the taxpayer in the United States for more than half of the tax year. Temporary absences for reasons such as school, vacation, or medical care are counted as time lived at home.
• Joint Return: The qualifying child cannot have filed a joint tax return for the year. An exception exists if the child and their spouse file a joint return solely to claim a refund of all income tax withheld or estimated taxes paid.

Individuals without a qualifying child can claim the EIC if they meet certain criteria. They cannot be claimed as a dependent or a qualifying child on anyone else’s return. They must also be at least 25 but under 65 years old at the end of the tax year. If filing a joint return, only one spouse needs to meet this age requirement.

Earned Income and Investment Income Limits

Earned income is defined as taxable income and wages from working for someone else or from a business the taxpayer owns or operates. This includes wages, salaries, tips, and net earnings from self-employment. Other includable income types are union strike benefits and certain disability benefits received before minimum retirement age. Income that is not considered “earned” includes interest, dividends, retirement income, Social Security, and unemployment benefits.

A taxpayer’s investment income must also be below a certain threshold. For the 2024 tax year, this limit is $11,600. Investment income includes taxable interest, tax-exempt interest, dividends, and capital gain net income. If a taxpayer’s investment income exceeds this annual limit, they are ineligible to claim the credit.

The amount of the EIC a taxpayer may receive depends on their income and the number of qualifying children they have. The credit phases in with earned income up to a certain point and then phases out as income continues to rise. For the 2024 tax year (taxes filed in 2025), the maximum Adjusted Gross Income (AGI) and credit amounts vary significantly.

| Number of Qualifying Children | Maximum AGI (Single, Head of Household) | Maximum AGI (Married Filing Jointly) | Maximum Credit Amount |
| :— | :— | :— | :— |
| 0 | $18,591 | $25,511 | $632 |
| 1 | $49,084 | $56,194 | $4,213 |
| 2 | $55,766 | $62,876 | $6,960 |
| 3 or more | $59,899 | $66,819 | $7,830 |

Claiming the Credit

The credit is claimed on Form 1040, U.S. Individual Income Tax Return, or the senior-focused Form 1040-SR. There is no separate, standalone form to apply for the EIC; it is an integrated part of the primary income tax filing process.

If a taxpayer has one or more qualifying children, they must also complete and attach Schedule EIC (Form 1040) to their tax return. The taxpayer will need to list each child’s name, Social Security Number, year of birth, and their relationship to the taxpayer.

Many taxpayers use tax preparation software to complete and file their returns. These programs ask questions to determine EIC eligibility and will automatically populate the necessary information onto Form 1040 and Schedule EIC. While the software performs calculations, it is the taxpayer’s responsibility to ensure all information provided is accurate and truthful. An incorrect claim can lead to repayment of the credit with interest and penalties.