The Earned Income Credit

A special tax credit, known as the earned income credit or EIC, is available to lower-income taxpayers who have at least some earnings from personal services during the year.

Income Phase-Out Range for 2010 Earned Income Credit
	No Qualifying Children	One Qualifying Child	Two Qualifying Children	Three or More Qualifying Children
Single, Surviving Spouse, Head of Household	$ 7,480 - $13,460	$16,450 - $35,535	$16,450 - $40,363	$16,450 - $43,352
Married Filing Jointly*	$12,490 - $18,470	$21,460 - $40,545	$21,460 - $45,373	$21,460 - $48,362
*If you are married, you must file a joint return to claim the EIC.

However, if you have investment income of $3,100 or more in 2010, you won't qualify for the credit. Investment income includes taxable and nontaxable interest and dividends, capital gains, net income from rental of personal property, net royalty income, and net income from passive activities shown on Schedule E, including real estate rentals (see IRS Publication 596, Earned Income Credit, if you are on the borderline and need to know exactly which lines on Schedule E to look at in determining your passive income).

All of these ceiling amounts are adjusted for inflation each year.

Work Smart

The extraordinary thing about the EIC is that if your credit is higher than the tax you'd otherwise owe, you will get the difference as a "refund" from the IRS. This extra payment from the federal government is intended to reward lower-income persons for working.

If you think the EIC might apply to you, you need to know:

Planning Tools

You can download Schedule EIC and Schedule E to aid in your financial planning.