Investment income for EITC

[twinsc]

I am using a non-TT tax software to file my taxes.  My income and dependents all fit qualifications for EITC.  My investment income which is just rental income ( a rental building that is leased to my own business ) is over-the-limit to qualify for investment income.  However, the tax software keeps putting me as eligible for EITC and adding it to the refund box.  The  IRS list says that some rental income counts toward investment income.  I am planning to "delete the EITC form" to remove it from my tax filing so that it does not include any EITC funds because it seems like a tax controversy question.  So my question is the tax software making that determination because the rental income comes from a rental building that is leasing to a business that I also own?

[CatinaT1]

I suggest you ask the software company you are using how their software works.

[AmeliesUncle]

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@twinsc wrote:

I am using a non-TT tax software to file my taxes.   So my question is the tax software making that determination because the rental income comes from a rental building that is leasing to a business that I also own?

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Yes, that  is probably it.  If I remember correctly, TurboTax does the same thing and allows the EIC.  Whether or not that is correct or not is questionable.  

One item of Investment Income is "passive" income.  Most rentals are passive, but income from a self-rental is NOT passive.  So I suspect that the program is seeing that and allowing EIC.

However, another item of Investment Income is "rents or royalties not derived in the ordinary course of a trade or business".   So direct reading of the Tax Code, "rents" would disqualify EIC.  However, the Worksheets from the IRS classify that category as rental income from "personal property" (which is legalese for non-real estate).  

So in summary, the IRS worksheets allow EIC.  Whether or not that would be upheld in Tax Court is questionable.