Hi, I'm Candace
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The Earned Income Tax Credit (EITC) is one of the most significant tax credits available to taxpayers. However, it is also one of the most complicated tax credits. With January 26th marking national EITC Awareness Day, it’s a great time to remind the many workers who may be missing out on this valuable tax credit.
The EITC is a significant tax credit for lower and middle income taxpayers that rewards earned income, especially for those with children. Further, it’s also a refundable tax credit, which means that it not only can be subtracted from taxes owed, but can be refunded to the taxpayer if taxes are not owed.
The EITC can be worth as much as $6,935 for the 2022 tax year and $7,430 for the 2023 tax year. However, the credit amount varies significantly depending on tax filing status, number of qualifying children, and income earned.
1. You must first have taxable “earned income”. This includes wages, tips, self-employment income, union strike benefits, and long-term disability benefits. It does not include interest/dividends, retirement income, social security, unemployment benefits, alimony, and child support.
2. You (and your spouse and qualifying child if applicable) must have valid social security numbers.
3. You have qualified children, OR:
4. Your income falls within the eligible income range (please refer to the table below).
5. Your tax year investment income is less than $10,300 in 2022 or less than $11,000 in 2023.
6. You must have lived in the U.S. for more than half of the year.
Qualified children must meet each of the eligibility tests:
For tax year 2022, your earned income and Adjusted Gross Income (AGI) must each be less than:
The EITC maximum credit amounts for 2022 are:
Candace is the founder of NewWay Accounting and is a CPA who specializes in working with fellow entrepreneurs. She strives to take the fear and anxiety out of taxes and help empower small business owners to feel more confident and in control of their finances.
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