Is a distribution from an inherited IRA considered investment income for purposes of EITC?

[tlgabe]

I have a special needs brother.  In the past he qualified for earned income tax credit.  I am trying to figure out why no credit this year.  Is a distribution from an inherited IRA considered investment income?  It is not listed on the investment income smart worksheet, and the worksheet shows he is eligible for the EITC.  So I cannot figure out what else would be limiting him from getting the EITC.  On the 1040, Line 17, Turbo Tax printed "NO" for EITC.    He has about $7,000 of earned income and interest and dividends well below the $3,500 investment income threshold.  

[MichaelL1]

approx how much is from the IRA?

[MichaelL1]

total income must be below $15,270.

[tlgabe]

Approx 6000 from Inherited IRA

[tlgabe]

Is it total income or AGI?

[MichaelL1]

The tax year 2018 Earned income and adjusted gross income (AGI) must each be less than $15,270.

[tlgabe]

Ugh.  Earlier version of Turbo Tax showed he received the EITC (did not have the limit at the total income level).  So I used the info to determine distribution from a special needs trust.  I have some flexibility, but of course undistributed is then taxed at the trust with unfavorable rates.  Not that much money but for him, $400 matters!

[tlgabe]

Just realized earned income IS less than $15,270.  And AGI is lower.  Total income is $16,000 however (reduced by IRA contribution to get AGI below $15,000).  

[tlgabe]

I still don't understand why turbo tax is limiting the EIC.  Earned Income and AGI are below $15,270.  I looked at paper forms and answered the questions and it appears the EIC should be allowed.  How can I find out if this is a bug in the turbo tax software?

[SweetieJean]

Did you accidentally say he could be claimed as a dependent?

[tlgabe]

No, did not accidentally check the dependent box, but in the process of looking for checked boxes, I found it!  There was a place to answer "none of the above" and now that it is checked, my brother gets the EITC as my research showed he should.  Thank you to all who replied!

[MichaelL1 · Accepted solution]

The tax year 2018 Earned income and adjusted gross income (AGI) must each be less than $15,270.

The IRA in not considered Investment Income.