The earned income credit (EIC), is a special credit for people who meet certain requirements and file a tax return. Persons with or without qualifying children may claim the EIC. The maximum credit is $2,271 for persons with one qualifying child, and $3756 for persons with two or more qualifying children. The maximum credit is $341 for persons without qualifying children. The following requirements apply to all taxpayers who may be eligible for the EIC.

Do you have earned income?

Earned income includes all income from working even if it is not taxable. Examples of earned income are wages, salaries, tips, and net earnings from self employment. Earned income also includes certain nontaxable amounts such as contributions to a 401(k) plan, basic housing and subsistence allowances. For military personnel, and salary reductions such as under a cafeteria plan. Earned income does not include amounts such as pensions and annuities, welfare benefits, unemployment compensation, worker's compensation benefits, or Social Security benefits.

Do you have investment income?

If you have investment income of more than $2300, you may not claim the EIC. Investment income includes taxable interest, tax exempt interest, dividend income, capital gain net income, certain income from rents or royalties, and certain income from passive activities. For more information, see Publication 596, Earned Income Credit.

What is your filing status?

To claim the EIC, your filing status must be single, head of household, qualifying widow or widower, or married filing jointly. You cannot claim EIC if your filing status is married filing separately.

Do you (and your spouse, if filing jointly) have a Social Security number?

You (and your spouse, if filing jointly) must each have a valid Social Security number issued by the Social Security Administration. You cannot claim the EIC if you (or your spouse if filing jointly) have a Social Security card that says "not valid for employment". If you are eligible for the EIC and you fail to provide your Social Security number (and your spouse's if filing jointly) on your tax return, the EIC will not be allowed.

Are you a qualifying child of another person?

If you (or your spouse if filing jointly) are a qualifying child of another person, you cannot claim the EIC.

Do you have foreign earned income?

If you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, you cannot claim the EIC.

Are you a nonresident alien?

If you are a nonresident alien, you cannot claim the EIC unless you are married to a United States citizen or resident, and you file a joint return and are taxed as a resident for all of 1998.

All of the previous requirements are for everyone who claims the EIC. There are no additional requirements for persons who do not have a child.

If you do not have a child,

There are three more requirements: age, dependency, and residence. To claim the EIC you (or your spouse, if filing jointly) must be at least age 25 but under age 65 at the end of 1998. If someone else can claim you (or your spouse, if filing jointly) as a dependent on their return, you cannot claim the EIC. If someone else can claim you as a dependent, but does not, you still cannot claim the EIC. To claim the EIC, you (and your spouse, if filing jointly) must live in the United States for more than half the year. Military personnel stationed outside the United States on extended active duty are considered to live in the United States during the period for EIC purposes.

If you have a child, is your child a "qualifying child"?

A qualifying child is a child that meets certain requirements. The child must be your son, daughter, adopted child, grandchild, stepchild, or eligible foster child. An eligible foster child is one who lived with you for the entire year and whom you cared for as you would your own child. Your child must have lived with you in the United States for more than half the year, or for the entire year, if an eligible foster child. Military personnel stationed outside the United States on extended active duty are considered to live in the United States during the period for EIC purposes. Your child must be under age 19 at the end of 1998, or age 24 at the end of 1998 and a full-time student during 1998, or any age if permanently and totally disabled.

Does your child have a Social Security number?

Your child must have a valid Social Security number issued by the Social Security Administration. If your child does not have a social security number or if your child's Social Security card reads "not valid for employment", your child is not a qualifying child. More information on EIC eligibility requirements can be found in Publication 596.

Is your child the qualifying child of another taxpayer?

You cannot claim the EIC for a child if you and someone else have the same qualifying child and the other person has a higher modified adjusted gross income that you do. This is true even if the other person does not meet all the rules to claim the EIC.

Do you meet the Earned Income and Modified Adjusted Gross Income (AGI) Limit?

To claim the EIC, your earned income and modified AGI must each be less than $10,030 if you have no qualifying children, $26,473 if you have one qualifying child, or $30,095 if you have two or more qualifying children. For more information, order Publication 596.

How do you figure the EIC?

The worksheet in the instructions for Forms 1040, 1040A, and 1040-EZ can help you figure your credit, or the IRS will figure the credit for you. If you want the IRS to figure the credit, carefully follow the steps in the instructions to the forms.

If you think you meet the requirements for the EIC, either with or without a qualifying child, see the instructions for Forms 1040, 1040A, or 1040-EZ to help you determine if you are eligible for the EIC. You may also want to order Publication 596, Earned Income Credit. Forms and publications can be downloaded from this site, or ordered by calling 1-800-829-3676.

What is advance EIC?

If you expect to qualify for the EIC in 1999, you may be able to receive part of the EIC in advance during the year. To see if you qualify to receive advance EIC, select Topic 604.

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