Hello, I have a question on Earned Income Tax Credit (EITC) qualification after having a debate with friends. One of IRS' requirements is that if the Investment Income is more than $3,650 in 2020, you are disqualified. And Investment Income includes Interest, Dividends, Capital gain income, Rent & royalty, Passive income.
Investment Income = Int & Div + Cap gains + Other
Let’s use this simple example:
* Int & Div = $4,000
* Capital gains = – $1,000 (loss)
* Others items: none
Which one of the following is correct to determine the EITC qualification?
Approach-A) This was my immediate thinking:
Investment Income = 4000 - 1000 = $3,000 therefore Qualified for EITC
Approach-B) My interpretation of the IRS assistant calculator info which says to include “Capital gain income (not losses)”:
Investment Income = 4000 + 0 = $4,000 therefore Disqualified for EITC
Resource: IRS assistant: Use the EITC Assistant | Internal Revenue Service (irs.gov)
Thank you.
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Approach B is correct. You cannot apply a capital loss.
fYI. For tax year 2021 up to $10,000 of investment income will be allowed.
Approach B is correct. You cannot apply a capital loss.
fYI. For tax year 2021 up to $10,000 of investment income will be allowed.
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