Married Filing Jointly: Do You Qualify for the Earned Income Credit?

The Earned Income Tax Credit (EITC) is a tax break designed to assist low- to moderate-income working families by reducing their tax liability and potentially increasing their refund. For married couples filing jointly, eligibility depends on income, dependents, and employment status. Understanding these requirements helps maximize tax benefits and avoid processing delays or audits.

Joint Filing Status Criteria

To qualify for the Earned Income Tax Credit (EITC) as a married couple, you must file a joint tax return. The IRS considers a couple married if they are legally wed as of December 31 of the tax year, including common-law marriages recognized by the state where they were established. Legal separation under a court decree means the couple is not considered married for tax purposes.

Filing jointly combines both spouses’ incomes, deductions, and credits on a single return, often resulting in a lower overall tax liability than filing separately. Joint filers benefit from higher income thresholds for tax brackets and deductions. For 2024, the standard deduction for married couples filing jointly is $29,200, compared to $14,600 for single filers. Certain tax credits, including the EITC, are reduced or unavailable to those who file separately.

If one spouse is a nonresident alien, both must elect to treat the nonresident spouse as a U.S. resident for tax purposes by filing Form 1040 with a statement of election. This allows them to file jointly and potentially qualify for the EITC, though it also requires reporting the nonresident spouse’s worldwide income.

Qualifying Income Sources

The EITC is based on earned income from employment, self-employment, or other taxable sources. Passive income, such as interest or dividends, does not count. The credit amount depends on total earned income and filing status, with phase-out limits applying as income increases.

Wages

Wages, salaries, and tips reported on Form W-2 qualify as earned income. This includes full-time, part-time, and temporary jobs, as well as bonuses, commissions, and taxable fringe benefits like employer-provided housing.

Certain payments do not count as earned income for EITC purposes, including workers’ compensation, Social Security benefits, and unemployment income. Pre-tax contributions to retirement plans, such as 401(k) deferrals, remain part of taxable wages on a W-2 and do not reduce earned income for EITC calculations.

For 2024, the maximum earned income allowed to qualify for the EITC depends on the number of dependents. A married couple with three or more qualifying children must have earned income below $66,819. If wages exceed the phase-out threshold, the credit gradually decreases until it is no longer available.

Self-Employment

Income from self-employment, including freelance work, independent contracting, and small business earnings, qualifies for the EITC. Net earnings reported on Schedule C (Form 1040) after deducting business expenses count as earned income.

Self-employed individuals must pay self-employment tax, which covers Social Security and Medicare contributions. In 2024, the self-employment tax rate is 15.3%, though half of this amount is deductible when calculating adjusted gross income (AGI). However, the full net earnings amount is used to determine EITC eligibility.

Accurate record-keeping is essential. The IRS may request documentation such as invoices, bank statements, or accounting records to verify self-employment income. Underreporting or failing to substantiate earnings can result in penalties or disqualification from the credit.

Other Taxable Earnings

Additional sources of taxable earned income that qualify for the EITC include taxable scholarships and fellowship grants, taxable disability benefits received before retirement age, and combat pay (if elected to be included).

Taxable scholarships apply to students who receive grants for teaching or research services. If a scholarship requires work, it is considered earned income. However, scholarships used solely for tuition and required fees are not taxable and do not count toward EITC eligibility.

Disability benefits from an employer’s plan are considered earned income if received before reaching the employer’s minimum retirement age. After that, they are treated as pension income and no longer qualify.

Military personnel can choose to include combat pay in their earned income calculation for EITC purposes. While combat pay is normally excluded from taxable income, electing to include it may increase the credit amount. This decision should be evaluated based on total income and potential tax benefits.

Dependent Requirements

Having qualifying dependents can increase the maximum EITC amount and adjust income limits. The IRS determines eligibility based on relationship, residency, age, and financial support.

A qualifying child must be the taxpayer’s biological child, stepchild, adopted child, sibling, half-sibling, or a descendant of any of these relatives, such as a grandchild or niece. Foster children qualify if placed by an authorized agency. More distant relatives or unrelated children generally do not meet the requirements unless they qualify under separate dependency rules.

A child must live with the taxpayer in the United States for more than half the tax year. Temporary absences, such as time spent at school, in military service, or in medical care, do not typically affect residency status. If the child lives with another parent or guardian for a greater portion of the year, only the primary caregiver—often determined by custody agreements or support contributions—can claim the EITC for that child.

A qualifying child must be under 19 at the end of the tax year or under 24 if a full-time student enrolled in school for at least five months of the year. Permanently and totally disabled children, regardless of age, can be claimed if they meet all other criteria. The IRS defines total disability as a condition that prevents substantial gainful activity and is expected to last indefinitely or result in death.

The child cannot provide more than half of their own financial support during the year. Earned income from part-time jobs, internships, or stipends does not disqualify a child unless they contribute more than half of their living expenses. Additionally, the child cannot file a joint return unless it is solely to claim a refund of withheld taxes.

Calculating the Credit

The EITC is calculated using earned income, adjusted gross income (AGI), and filing status. The credit follows a phase-in and phase-out structure, increasing as earnings rise up to a certain point before gradually decreasing when income exceeds the threshold. For 2024, the maximum credit amounts range from $632 for those without children to $7,830 for taxpayers with three or more qualifying children.

The IRS applies a percentage rate to calculate the credit during the phase-in stage. For example, a married couple with one qualifying child receives 34% of their earned income until they reach the maximum credit. If they earn $10,000, their EITC would be $3,400. Once earnings surpass the plateau phase, the credit remains fixed before entering the phase-out range, where it declines as income continues to rise.

AGI limits the credit amount. If AGI exceeds the phase-out threshold, the credit is reduced at a fixed rate. In 2024, a married couple with two children begins losing their credit once AGI surpasses $28,120, with complete phase-out occurring at $62,902. Investment income is also capped at $11,000—exceeding this amount disqualifies the taxpayer from receiving any EITC.

Claiming the Credit on the Return

Once eligibility is confirmed and the EITC amount is calculated, the next step is properly claiming it on a tax return. The IRS requires specific forms and documentation to ensure accuracy and prevent fraudulent claims.

Taxpayers must complete Schedule EIC (Form 1040) if claiming the credit with qualifying children. This form requires details such as each child’s name, Social Security number, relationship to the filer, and residency information. For those without qualifying children, the EITC is still available but does not require Schedule EIC. The credit amount is then entered on Form 1040, reducing tax liability or increasing a refund.

Electronic filing with direct deposit speeds up processing times and reduces errors. The IRS typically issues refunds within 21 days, but due to the Protecting Americans from Tax Hikes (PATH) Act, refunds involving the EITC cannot be issued before mid-February.

If the IRS selects a return for review, additional documentation may be required, such as school records, medical documents, or lease agreements proving a child’s residency. Errors can result in denial of the credit and penalties, including a ban on claiming the EITC for up to 10 years in cases of intentional disregard of the rules. Taxpayers who previously had their credit denied must file Form 8862 to request reinstatement in future years.