IRS Pub 596: Earned Income Credit Rules Explained

IRS Publication 596 serves as the manual for the Earned Income Credit (EIC), a tax benefit for working people with low-to-moderate incomes. The EIC is a refundable credit, meaning that even if a filer owes no tax, they can still receive the credit amount as a refund. This credit is designed to supplement the wages of eligible workers and families. Understanding the rules in Publication 596 is the first step for any taxpayer who believes they might qualify.

Core Eligibility Requirements for All Filers

Before considering income or family size, every individual must meet a set of foundational rules to qualify for the Earned Income Credit. Failing to meet even one of these core rules means a person cannot claim the EIC, regardless of their other circumstances. These standards apply universally to all filers.

The taxpayer, their spouse if filing jointly, and any child claimed for the credit must have a Social Security Number (SSN) valid for employment. The SSN must be issued on or before the tax return’s due date, including any extensions. An Individual Taxpayer Identification Number (ITIN) cannot be used for EIC purposes.

A taxpayer’s filing status must be Married Filing Jointly, Head of Household, Qualifying Surviving Spouse, or Single. The Married Filing Separately status is disallowed for the EIC. A limited exception exists for separated spouses who may file as Head of Household if they meet strict criteria, such as living apart from their spouse for the last six months of the year.

The filer must be a U.S. citizen or a resident alien for the entire tax year. A nonresident alien can only claim the EIC if married to a U.S. citizen or resident alien and they choose to file a joint return. A filer is also ineligible if they file Form 2555 to exclude foreign earned income.

There is a limit on investment income, which for the 2025 tax year is $12,000. Investment income includes items like interest, dividends, and capital gain net income. If a taxpayer’s investment income exceeds this amount, they are disqualified from the EIC, regardless of their earned income.

Rules for Claiming a Qualifying Child

Having a qualifying child significantly increases the potential amount of the Earned Income Credit, but the child must meet four specific tests outlined by the IRS. These tests—relationship, age, residency, and joint return—must all be satisfied for a child to be considered a qualifying child for the EIC.

Relationship Test

The child must be the filer’s son, daughter, stepchild, or an eligible foster child. The definition also extends to a brother, sister, half-brother, half-sister, stepbrother, or stepsister. A descendant of any of these individuals, such as a grandchild, niece, or nephew, also meets the test. An adopted child is always treated as the filer’s own child.

Age Test

The child must be younger than the person claiming them and either under age 19 or a full-time student under age 24. A person is a full-time student if enrolled for what the school considers full-time attendance for at least five calendar months during the year. A child who is permanently and totally disabled can be of any age.

Residency Test

The residency test requires that the child must have lived with the filer in the United States for more than half of the tax year. The United States includes the 50 states and the District of Columbia. Temporary absences for school, vacation, or medical care are counted as time lived at home.

Joint Return Test

The qualifying child cannot have filed a joint tax return with their spouse for the tax year. An exception exists if the child and their spouse file a joint return only to claim a refund of all income tax withheld or estimated taxes paid.

When a child meets the rules to be a qualifying child for more than one person, the IRS uses “tie-breaker” rules. If one of the persons is the child’s parent, the parent has priority. If both persons are the child’s parents, the claim goes to the parent with whom the child lived for the longer period. If the time was equal, the parent with the higher adjusted gross income (AGI) gets to claim the child. If no person is the child’s parent, the claim goes to the person with the highest AGI.

Rules for Filers Without a Qualifying Child

Individuals who meet the core eligibility requirements but do not have a qualifying child can still claim the EIC, though the credit amount is smaller. This provision is designed to provide tax relief to lower-income working adults who are not raising children. To qualify under this category, a filer must satisfy three additional conditions.

The first condition is an age requirement: the filer must be at least 25 years old but under 65 at the end of the tax year. If filing a joint return, at least one spouse must meet this age requirement.

A second rule is that the filer must have lived in the United States for more than half of the year. This main home must be in one of the 50 states or the District of Columbia.

The final condition is that the filer cannot be claimed as a dependent by another person on their tax return. This means the individual cannot be someone else’s qualifying child or qualifying relative.

Calculating Your Earned Income and Credit Amount

Once eligibility is confirmed, the EIC amount is determined by the filer’s income and the number of qualifying children. The calculation is based on both earned income and adjusted gross income (AGI). The IRS uses a sliding scale where the credit amount increases with income up to a certain point and then gradually decreases to zero.

Earned income includes wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. Certain disability benefits received before minimum retirement age also count as earned income. Items not considered earned income include:

• Interest and dividends
• Retirement income from pensions or annuities
• Social Security benefits
• Unemployment benefits
• Child support

The credit calculation involves comparing the filer’s earned income to their AGI. The IRS requires the filer to use whichever amount is greater to look up their credit amount in the EIC Tables. These tables are organized by filing status and the number of qualifying children.

For the 2025 tax year, income limits and maximum credit amounts depend on the number of qualifying children. A single filer with no children must have an income below $18,591, while a married couple filing jointly with three or more children must have an income below $69,398. The maximum credit for 2025 is $632 for filers with no children, $4,213 for one child, $6,960 for two children, and $7,830 for three or more children.

How to Claim the EIC on Your Tax Return

After determining eligibility, the final step is to claim the EIC on the federal income tax return. The process involves completing specific forms and depends on whether the filer has a qualifying child.

For filers with one or more qualifying children, completing Schedule EIC is mandatory. On this schedule, the filer must provide information for each child, including their full name, Social Security Number, and year of birth. The filer also specifies the child’s relationship and the number of months the child lived with them.

If the filer does not have a qualifying child, they do not need to fill out Schedule EIC. Tax preparation software will automatically handle these calculations and form selections based on the user’s answers.

The calculated EIC amount is entered on Form 1040. The credit is refundable, so it will first be applied to any income tax the filer owes. If the credit is larger than the tax liability, the IRS will refund the difference to the taxpayer.