You will not max out your benefits due to your low income. If you have multilabel dependents that qualify be sure to add them all. The Earned Income Tax Credit can be substantial. Be sure to see if you qualify for Head of Household filling status. TurboTax will guide you through these questions.
Can I claim the Earned Income Tax Credit?
If you were married filing jointly and earned less than $56,844 ($50,954 for individuals, surviving spouses or heads of household) in 2020, you may qualify for this tax credit, or even for a refund check. It's complicated, but the Earned Income Tax Credit (EITC) is worth exploring if you or someone you know has modest earnings.
- The credit reduces any federal income tax you owe, dollar-for-dollar.
- If the credit completely eliminates your tax bill, and some credit is still left over, you can actually get a cash refund for the remaining amount.
To help you find out if you qualify, TurboTax asks simple questions so you can get the largest possible credit.
Tests for qualifying
First you have to qualify. Then your income has to be within stated limits. Finally, if you have one or more kids, they have to qualify too for you to receive a larger credit. If you pass all these tests, you could get a credit of as much as $6,660 for 2020 depending on your income and the number of children you have.
Once you determine that you qualify for the credit, use the Earned Income Credit table found in the instructions for Form 1040 to look up your income and find out the amount of credit you're entitled to.
You qualify if:
- You have income from earnings (for example, from a job, your own business, union strike benefits, certain long-term disability benefits).
- You did not receive more than $3,650 in interest or dividends, or income from rentals, royalties or stock and other asset sales during 2020.
- You are single or, if married, do not use the Married Filing Separate status.
- You, your spouse and children, if applicable, all have Social Security numbers.
- You and your spouse are not considered as a qualifying child of someone else.
- You are not excluding any income you earned in a foreign country on your return.
- You are a citizen or resident of the United States.
- You have dependents, or
- You do not have a qualifying child, but you and your spouse are between 25 and 65, not the dependents of anyone else, and you have lived in the United States for more than half of the year.
How much can I earn and still qualify?
This credit is targeted at households with modest incomes, so if you earn "too much" you may not qualify. Just how much can you earn and still qualify? It depends on how many qualifying children you have (we'll define this in a moment). Those with the lowest income qualify for the biggest credits. Those with incomes above the phase-out threshold qualify for lower credits until they reach the point where the credit is eliminated completely. The rules have been liberalized to result in higher credits for many households, especially those with three or more qualifying children. The following table shows the 2020 income limits for receiving credits and the maximum 2020 credit amounts.
