The New Year is upon us, and plenty of Americans are working hard on their resolutions to lose weight, save money, or plan for upcoming vacations. But the New Year isn’t exciting for everyone: many people dread tax season.
The IRS deadline (April 18) is fast-approaching, meaning now is a good time for you to start gathering documents and schedule a meeting with your tax adviser. Even though 2017 is over, you may still be able to find ways to reduce your 2017 tax liability and get a larger refund.
As you review your documents and consider deductions, don’t forget to see if you qualify for the earned income tax credit. This can save you thousands of dollars as you move into the new year.
What is the Earned Income Tax Credit?
This tax credit is for low- to moderate-income earners, meaning you must remain within certain income ranges (see below).
If you do meet these criteria, then the credit is applied to your taxable income, meaning lower taxes for you (and more cash in your pocket).
Basic Requirements
In order to be eligible for this tax credit in 2017, you must meet several basic requirements:
- You must have earned income from a business or farm
- You must be a US citizen with a valid Social Security number
- You must have resided in the US for more than half of the tax year
- Married couples must file jointly, not separately
- Investment income may not exceed $3,450
If you meet these criteria, read on for the tax credit income thresholds.
Income Thresholds
Here’s the crux of the program: you must be within certain income ranges in order to qualify for this tax credit. These ranges depend on the number of children you have, too.
The income requirements to qualify for the credit are as follows:
- $15,010 with no children ($20,600 if filing jointly)
- $39,617 with 1 child ($45,207 if filing jointly)
- $45,007 with 2 children ($50,597 if filing jointly)
- $48,340 if 3+ children ($53,930 if filing jointly)
Also, if you fall into the first bucket (filing with no children) then your birth date must fall between 1953-1992 and you cannot be claimed as a dependent on anyone else’s tax return.
Too Much of a Good Thing
Of course, the IRS has implemented a limit on the tax credit benefits. This means that the Earned Income Tax Credit can’t exceed the following limits:
- $510 with no children
- $3,400 with 1 child
- $5,616 with 2 children
- $6,318 with 3 children
We know these limits and thresholds may be confusing. If you think you may qualify, or if you have questions about income ranges or other requirements, consult with a qualified tax professional.
Do You Qualify?
The earned income tax credit is often included on tax returns in error. This is because tax filers may not be familiar with the qualification requirements outlined above. In order to avoid some of the most common errors with this tax credit, ensure that you’ve carefully reviewed your own income limits and family situation.
No one likes paying taxes, but the process doesn’t need to be miserable. Ensure that you’re well-versed in 2017 tax law changes that may impact you, especially given major life changes like a marriage or the birth of a child.
Get your guaranteed maximum refund when you file your taxes with VTax. You’ll get the ultimate in quality preparation no matter how complicated, messy, or difficult your tax dilemma might seem. Request your free quote today!