Earned Income Credit (EIC) Estimator
Use this calculator to get an estimated Earned Income Credit (EIC) amount for the 2023 tax year. The EIC is a refundable tax credit for low-to-moderate-income working individuals and families. Please note that this is an estimate and not tax advice. Consult a qualified tax professional for accurate tax planning.
This includes wages, salaries, tips, and net earnings from self-employment.
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A qualifying child must meet age, relationship, residency, and joint return tests.
For 2023, investment income must be below $11,000 to qualify for EIC.
Understanding the Earned Income Credit (EIC)
The Earned Income Credit (EIC) is one of the federal government's largest and most effective anti-poverty programs. It's a refundable tax credit, meaning you could get money back even if you don't owe any tax. The credit is designed to help low-to-moderate-income working individuals and families, providing a boost to their financial well-being.
Who Qualifies for EIC?
To qualify for the EIC, you must meet several requirements, including:
- Earned Income: You must have earned income from employment or self-employment. This includes wages, salaries, tips, and net earnings from self-employment.
- Adjusted Gross Income (AGI): Your AGI must be below certain limits, which vary based on your filing status and the number of qualifying children you have.
- Investment Income: Your investment income (e.g., interest, dividends, capital gains) must be below a specific threshold for the tax year (e.g., $11,000 for 2023).
- Social Security Number (SSN): You, your spouse (if filing jointly), and any qualifying children must have valid SSNs.
- U.S. Citizen or Resident Alien: You must be a U.S. citizen or a resident alien all year.
- No Foreign Earned Income Exclusion: You cannot claim the foreign earned income exclusion.
- Qualifying Child Rules: If you claim children, they must meet age, relationship, residency, and joint return tests. If you don't have a qualifying child, you must be at least 25 but under 65 at the end of the tax year, and not be a dependent of another person.
How is the EIC Calculated?
The EIC calculation is based on a few key factors:
- Earned Income: The credit amount increases with your earned income up to a certain point (the "phase-in" range).
- Maximum Credit: Once your earned income reaches a specific level, the credit reaches its maximum amount.
- Phase-out: As your earned income (or AGI, whichever is greater) continues to rise beyond a certain threshold, the credit begins to decrease (the "phase-out" range) until it reaches zero.
- Number of Qualifying Children: The maximum credit amount and the income thresholds for phase-in and phase-out are significantly higher for taxpayers with qualifying children, especially those with two or three or more children.
- Filing Status: Married individuals filing jointly generally have higher income thresholds before the credit begins to phase out.
The specific percentages and income thresholds used for calculating the EIC are updated annually by the IRS. This calculator uses the 2023 tax year figures for its estimations.
Importance of the EIC
The EIC helps millions of individuals and families each year by providing financial relief, encouraging work, and reducing poverty. It can be a significant boost to household budgets, helping with essential expenses like housing, food, and transportation.
Disclaimer
This calculator provides an estimate based on simplified rules for the 2023 tax year. It does not account for all possible tax situations, deductions, or credits. For precise EIC eligibility and calculation, please refer to IRS Publication 596, "Earned Income Credit (EIC)," or consult a qualified tax professional or tax preparation software.