Understanding Tax Credits

Earned Income Tax Credits


What is Earned Income Tax Credit?

The earned income tax credit, also known as the EITC or EIC, is a refundable tax credit for working people with low to moderate income. A tax credit puts more money in your pocket, reduces the amount of tax you owe, and may also give you a refund. Yet, one out of five eligible workers fails to claim it. You might qualify for EITC this year even if you didn't in the past.

How Do I Know if I Qualify?

With the exception of someome who receives certain disability income, you must work for someone or run your own business or farm to qualify for EITC. Workers can find out if they qualify for EITC using the EITC Assistant tool at www.irs.gov/eitc.

To claim EITC on your tax return, you must meet the following rules:

  • You, your spouse (if you file a joint tax return) must have a Social Security number that is valid for employment.
  • You must have earned income from working for someone else or owning or running a farm or business.
  • If married, you cannot file separately.
  • You must be a U.S. citizen or legal permanent resident all year.
  • You cannot file Form 2555 or Form 2555 EZ (related to foreign earned income).
  • You must meet the earned income, AGI, and investment income limits. See the EITC Income Limits for the tax year amounts.
  • And you must meet one of the following:
    • Have a qualifying child:
      • Age - Your child must meet one of the following:
        • Be under age 19 at the end of the year and younger than you or your spouse (if you file a joint return).
        • Be a full-time student during at least five months of the year and under age 24 at the end of the year and younger than you or your spouse (if you file a joint return).
        • Be permanently disabled at any time during the year and any age.
        • Relationship - A child must be your:
          • Son, daughter, adopted child, stepchild, eligible foster child, or a descendant of any of them (example: a grandchild), or
          • Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (example: a niece or nephew).
      • Residency - Your child must have lived with you, or your spouse if you file a oint return, in the United States for more than half the year.
      • Joint Return - Your child must not have filed a joint return or if your child filed a joint return, your child and his/her spouse filed only to claim a refund and were not required to file.
    • If you do not have a qualifying child:
      • You must be age 25 but under age 65 at the end of the year,
      • Live in the United States for more than half the year, and
      • Not qualify as a dependent for another person.

How Do I Claim EITC?

If you qualify for EITC, you must file a Federal tax return and claim it, even if you owe no tax or are not required to file.

Where Can I File?

You can file with any tax preparer or you can prepare your own taxes using Free File and file your federal return for free.


Child Tax Credits


What is the Child Tax Credit?

Parents and guardians who are eligible to claim their children as dependents on their tax returns can receive significant tax breaks, reduing your tax bill by as much as $1,000 per qualifying child. 

Who Qualifies for the Child Tax Credit?

To qualify for the Child Tax Credit (CTC), you must have a child or dependent who meets ALL of the following requirements:

  • The child is related to you as your son, daughter, stepchild, foster child, adopted child, brother, or sister. The child may also be a descendant of any of these relatives (example: your grandchild, niece, or nephew),
  • The child lived with you for more than half the year,
  • The child is younger than age 17 at the end of the year (this is different from claiming a dependent where the children younger than 19 qualify, or an adult age 24 if he/she is a full-time student),
  • The child did not provide more than half his/her own financial support during the tax year,
  • The child is a U.S. citizen, U.S. national, or legal permanent resident,
  • The child does not file a joint tax return with his or her spouse (some exceptions apply),
  • You are eligible to claim the child as your dependent.

Resources on the Child Tax Credit


Additional Questions About Tax Credits

If you have additional questions about tax credits, please contact our office or your local taxpayer advocate:

Christopher Nebel
Local NC Taxpayer Advocate