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posted Jun 4, 2019 4:41:58 PM

Clarification of what is included in earned income. It appears that the scholarship or grant has been included for the EIC credit.

I checked on the IRS Publication 596 and it states that scholarship or grants are NOT considered earned income for the EIC.  However, it appearsfor the amount of the EIC,  the scholarship reported on 1098-T has been considered income for the EIC.  How can I see how this happened for my return?

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Level 15
Jun 4, 2019 4:41:58 PM

Two ways:

1. In the forms mode, look at the EIC worksheet. It will tell you what amount the EIC was looked up (calculated) on.

2. Get the EIC amount from line 66a of form 1040 or line 42a of 1040A. Then look that number up in the EIC table https://apps.irs.gov/app/vita/content/globalmedia/earned_income_credit_table_1040i.pdf

You are correct: scholarship is not used to calculate EIC. Just because scholarship is included on line 7 of forms 1040 & 1040A does not mean it was used for EIC.

Scholarship income cannot increase your EIC, but it can reduce it. The earned income credit is first calculated (actually looked up in a table) on your earned income then it is calculated on your total income (AGI). You get the lesser of the two calculated EIC numbers.