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I am not qualifying for the "earned income credit" as it says I've earned too much "investment income". What makes up "investment Income" Interest? Dividends? Gains?

 
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3 Replies
gloriah5200
Expert Alumni

I am not qualifying for the "earned income credit" as it says I've earned too much "investment income". What makes up "investment Income" Interest? Dividends? Gains?

Investment income for purposes of earned income credit are:

income, not loss, amounts from Form 1040 lines 2a, 2b, 3b and 7

 

That would be: 

tax exempt interest, 

taxable interest,

ordinary dividends

and capital gains

Form 8814 line 1b

Royalties and rental income

passive activity net income

 

There is also a worksheet in IRS publication 596, Worksheet 1

IRS Publication 596

I am not qualifying for the "earned income credit" as it says I've earned too much "investment income". What makes up "investment Income" Interest? Dividends? Gains?

Fast and Helpful - perfect.   I did have "investment Income" over the amount to qualify, but barely.   

It's odd that I hit a number and it goes from a large EIC Credit to $0.    

DawnC
Expert Alumni

I am not qualifying for the "earned income credit" as it says I've earned too much "investment income". What makes up "investment Income" Interest? Dividends? Gains?

Yes, unfortunately, the investment interest is not gradually instituted.   Once you hit the threshold, you lose all of the EIC.   Make sure you don't have any investment losses that you have not reported.   If you are close to the EIC cut-off amount and your credit is large, it would behoove to ensure you have entered all of your losses.   Double-check all of your entries.  

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