About the EITC

The Earned Income Tax Credit, or EITC, is a federal AND N.C. income tax credit that benefits low-and moderate-income working families. The credit is refundable, so if you qualify for a larger amount of EITC than you owe in taxes, the IRS will refund you the difference. You can even get the EITC if you do not owe any taxes and are not required to file a federal tax return based on your income. However, you must file a federal income tax return in order to get the EITC.

Income Limits:

To receive the EITC you must fall under certain income limits that increase with family size. Below is a chart with these limits and the maximum federal and N.C. EITC. The amount of the EITC increases with income, reaches a plateau (the maximum amount) and then slowly decreases. Use the EITC Estimator, to estimate the amount of the EITC for your income. The North Carolina EITC is 5% of the Federal EITC and uses the same eligibility requirements.

Workers who qualify for the EITC must file a federal tax return in order to access the credit, even if they would normally not do so because their earnings are too low to pay taxes. Taxpayers must file either Form 1040 or Form 1040A and attach Schedule EIC

Other Eligibility Criteria:

• Have earned income from employment or self-employment.
• If married, filing jointly.
  
• Have been a U.S. citizen all year
  
• Have a qualifying child not being claimed on another person’s tax return.
  • A qualifying child is:
    • A relative
    • At the end of 2011, under the age of 19, a full-time student under the age of 24, OR any age, if the person has a permanent and total disability at any time during the year
    • Someone who lived with the taxpayer in the U.S. for more than half of the year.

• If you do not have a qualifying child you must:
  • Be at least 25 years of age or under 65 at the end of 2011;
  • Have lived in the United States for more than half the year (military personnel overseas are considered to be living in the U.S. while on active duty); and
  • Not be the qualifying dependent of another person.

Those with eligible children for the EITC are likely eligible for the non-refundable Child  Tax Credit. For more information, check out the Other Valuable Tax Credits page.

Seven EITC Myths:

I Cannot Claim the EITC Because…

1. I EARN SO LITTLE, I DON’T OWE TAXES OR HAVE TO FILE A RETURN

Even if you aren’t required to file a tax return, you can still qualify for the EITC. If you are eligible for more EITC than you owe in taxes, the government will refund you the difference. To claim EITC, you must file an income tax return.

2. I DON’T HAVE CHILDREN

Single persons and married couples without children may still qualify for the EITC. While the credit is smaller for those without children, you may still qualify for up to $488 in Federal ($464) and NC ($24) EITC.

3. I CARE FOR CHILDREN WHO ARE NOT MY OWN

Grandparents, foster parents and others caring for children may claim the EITC, if they meet eligibility requirements. Lucinda and John care for grandchildren living in their home for more than six months of the tax year and are estimated to receive an EITC refund of more than $5,000.

4. I RUN MY OWN BUSINESS

Small business owners and the self-employed are eligible for the EITC, if they meet other eligibility guidelines. Mary runs a childcare business and thought she earned too much to qualify. However, after deducting business expenses, she found her “earned income” was less than she thought, making her eligible for the EITC. Mary now keeps a careful record of business expenses to determine if she qualifies for the EITC.

5. I’M CURRENTLY UNEMPLOYED OR ONLY WORKED PART OF THE YEAR

If you had earned income at some point during the year, you may still qualify for the EITC.

6. I’M AFRAID OF LOSING MY OTHER BENEFITS

The EITC does not count as income in determining eligibility for benefits like cash assistance, Medicaid, food stamps, SSI, or public housing. Some benefit programs count the EITC as a resource under certain circumstances. Contact your local Department of Social Services office to find out more.

7. I DON’T TAKE HANDOUTS

The EITC is tax law -- it is not about handouts or hand-ups. Congress created the EITC to make the tax system fairer for all and to reward work. The tax system gives tax credits to the rich and poor alike.