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Level 1

Question

For 2020 will a 401K early withdrawal affect EITC eligibility?

Forum|Forum|6 years ago
August 13, 2020
3 replies
41 views

Will Care’s act early 401k withdrawal amount be added to EITC AGI?

TurboTax Premier Online

Level 15

The withdrawal from a 401(k) is a taxable event so the taxable portion of the distribution will be added to your other income and taxed at your current tax rate. Yes, it will affect your EITC eligibility.

Level 15

Because a 401(k) withdrawal is considered unearned income, if the amount is more than $3650, you will be disqualified from the earned income credit even if your total income is not over the absolute limit. These rules and limitations were not modified by the CARES act.

Level 15

Unemployment is not considered investment income and will not disallow the credit by itself however it does come into play for income limitations.

See pages 5&6 :

https://www.irs.gov/pub/irs-pdf/p596.pdf

https://ttlc.intuit.com/community/credits-and-deductions/help/what-are-the-qualifications-for-the-earned-income-credit-eic-or-eitc/00/25603