EIC is here to stay

By: Robert A. Johnson

EIC (Earn Income Credit) is here to stay.

The earned income credit is for the low to moderate income individual or couple. This is a credit you can take to reduce or eliminate the amount of tax you owe. In some cases, it also provides a healthier return. Unlike some other credits you can receive on your tax return, this is one of the few that is refundable. In other words if you have very little or no tax to reduce you will receive the balance of the EIC on your federal return.

Income Qualifications

To qualify for the earned income credit you must have either children or an income that falls below a certain level. For instance, a single person with an income of under $12,590 they can receive up to $428. This of course will be calculated according to their exact income on the basis of income times 7.65% for incomes up to $6,999 when the credit begins to phase out.

For families with children the qualifications become more complex. Below is a sample break down of the maximum benefit:

- One qualifying child will equal $2,853
- Two qualifying children equals $4,716
- No children $428

Now keep in mind these are the maximum benefit amounts and will be affected by your gross income. These numbers are up from the previous year by anywhere from one thousand to two thousand dollars of earned income. It is prudent to double-check your 2007 tax return for any errors that may have occurred. Alternatively, if you are filing late you need to know all the possible deductions and credit changes that were made for the 2007 tax filing year.

Qualifying Child

To get the maximum EIC that you are entitled to you need to also be aware of what constitutes a qualifying child. There are situations where this can be complicated as in the case of an aunt or uncle claiming a niece or nephew. However the federal guidelines are:

1. - Age- According to the IRS website under age 19 at the end of 2007, A full-time student under age 24 at the end of 2007, or permanently and totally disabled at any time during 2007, regardless of age.

2. Relationship- A child may be your daughter, son, stepdaughter, stepson, grandchild, great-grandchild, sister, brother, stepsister, stepbrother, half sister, half brother, niece, nephew, great niece, great nephew or any descendant of the above listed. In some cases, foster children and adoptive children are also qualifying children, provided they are placed with you by a court.

3. Residence- Your child of course must be a resident of the United States except for temporary absences due to school, jail, hospital or other stays outside the country that are considered to be temporary, case in point military service.

This is a break down of the main components of claiming the EIC credit for the 2007 tax year. There are other special instances that may fall outside these qualifications. Always check for the most current updates when filing current or prior year’s tax returns.