EIC and investment income

[d2jpatel]

If you have investment income more then $3650, you do not get EIC. Let’s say i have $4000 as interest income and i have previous year carryover loss of $5000 from stock. So does my investment income would be $4000-$3000 = $1000 or it’s remain same as $4000 and do not get any EIC? 

[Critter]

Look at worksheet 1 for your answer :  

https://www.irs.gov/publications/p596#en_US_2019_publink1000297452

[d2jpatel]

Thank you! But i did not fill the forms yet. Just straight question. Looking for straight answer of the scenario I described. 

[Hal_Al]

Q. So is my investment income  $4000-$3000 = $1000 or does it remain $4000 and I do not get any EIC? 

A. Simple answer: it remains $4000 and you do not qualify for EIC

Line 5 of the referenced worksheet says "Enter the amount from Form 1040 or 1040-SR, line 6. If the amount on that line is a loss, enter -0-

[d2jpatel]

Thank you!  Then where that loss applied?

[d2jpatel]

This is from turbotax

“If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income, for example.....”

https://turbotax.intuit.com ›

[VolvoGirl]

It is on 1040 line 6 and subtracted off your total income and reduces your AGI Adjusted Gross Income.

You don't get a refund for losing money. It just reduces your total income so you get taxed on a lower amount.  If you were already getting back all that you could a loss won't increase it.  And by reducing your income it can reduce any credits you are getting.

2019 Capital Gains and Losses go on Schedule D then to 1040 line 6

And If you have a net loss for the year you can only deduct 3,000 (1,500 MFS) max on your tax return.  The rest you have to carryover to next year.  You have to report the carryover every year until it's used up.  You can't skip a year.

[d2jpatel]

But interest is invest income then loss on those investment also investment income in -ve. Isn’t it?

[VolvoGirl]

1099 INT interest income goes on 1040 line 2 and 1099 DIV dividends go on line 3.  Int&Div go on Schedule B.   They are separate from schedule D investment sales and capital gains.

[d2jpatel]

Correct. But when they calculate the investment income why can’t you subtract net loss from your investment income? Both are investment income. Isn’t it?

[VolvoGirl]

To qualify for the EIC credit?  Look at Worksheet 1 on this page.  It's very simple.  Just enter your 4,000 interest on line 1.  Then on line 5 you can't enter your loss.  It only lets you enter zero, not less.  So it is not subtracted from investment income to qualify for EIC.  Sorry.

https://www.irs.gov/publications/p596 

[VolvoGirl]

That is how they wrote the rules.  You have to ask your congressman.

[d2jpatel]

So basically you put your money on CD then you are screwed. Bank used your money and made lots of money and you loose your EIC. Always fool the people. 😔🤔

[Critter]

Sorry ... I don't feel your pain ... if you have enough in savings that it made $4000 at the current interest  rates then you really don't need the EIC ... it is meant for those without means which you obviously have.  

[d2jpatel]

I wish. But I don’t. I just used an example.