Earned Income Credit On Tax : What It Is and Benefits. Earned Income Credit is a credit given on tax payment to a person who qualifies. Earned Income Credit is an income tax credit on your earned income. This Earned Income Tax Credit is completely refundable, which means that if the credit sum exceeds your tax payment, you actually get the balance money. So, it is a great scheme which you should go through. This is one of the few refundable tax credits , while most of the tax credits are non-refundable where you don’t get any extra money.
What is Earned Income Credit ?
It is a credit which is like a rebate or a cash back by the government. It is a scheme by the government where people who earn modest income can avail the benefits of tax credits. In some cases, you even stand to get some money from the government, instead of paying tax to the government, which is a remarkable feeling. For people who are facing financial stress due to lower income or more number of dependents, it is a great financial lift.
What are the Requirements to qualify for Earned Income Tax Credit ?
There are a lot of requirements or Tests which must be satisfied before you become eligible for Earned Income Tax Credit. At first, it seems that the requirements are typical , but they are simple and easy to understand. All you have to do is go to the EITC Home Page of the IRS website. There is a Q&A page as well. You can take out your time and read these two pages of guideline information. After you have read, you will know whether you qualify for Earned Income Tax Credit or not. Many tax filing software have incorporated this into their software and will prompt you automatically if you qualify for it. So, it is important that you fill the tax software with all details so that it can notify you of all available tax credits , refundable and otherwise.
How Much Earned Income Tax Credit Will I Get ?
Well, there is a scaled credit structure. The maximum credit value for 2012 is $ 5,891 which is a great saving on tax payment. The tax credit goes from $ 475 to the maximum limit. There is a table that can let you easily find your projected earned income tax credits depending on your income and number of dependent persons. After you made your calculations and read the guideline, you can fill up the form which is available online.
After looking at the Charts, guideline and the form, I have found some unique and important points which can be of help.
- Earned Income Tax Credit is not only for U.S. citizens but also for resident aliens. They too can avail this credit, if they qualify.
- People who are not eligible should not fill the form as it may ban you from applying later on.
- Even your siblings can be treated as dependents. It is not that dependents are just your children or grand-children.
People really want to save money on tax and this scheme not only provides tax rebate, but also offers the possibility of the person earning cash.