Learn the basics of earned income credit and pandemic change


Q. My son turned 18 in January. Can I claim it on my tax return for the income tax credit? He’s still in high school, in grade 11. Thanks for your help.

– Tanya from Cleveland

A. Hi Tania,

Thanks for writing.

We believe you are asking if an 18-year-old is an eligible child for the earned income credit purposes. The answer to this question, according to the IRS website, is “Yes.”

To be an IEC eligible child, your child must be:

• Under 19 at the end of the year.

• Under 24 at the end of the year and a full-time student for at least 5 months of the year.

But this assumes that you are otherwise eligible for the IEC and that it is otherwise considered your dependent. To be considered your dependent, according to the IRS website:

• The child must have lived with you for at least half of the year.

• The child / dependent must be related to you as a son, daughter, stepson, foster child, brother, sister, half-brother, half-sister or descendant of one ‘between them.

Note: You must provide more than half of the child / dependent support.

As you will see, the additional rules for qualifying for the IEC are complicated.

Basic eligibility rules, from the IRS website:

To be eligible for the IEC, you must:

• Show proof of earned income.

• Have investment income of less than $ 3,650 in the tax year in which you claim the credit.

• Have a valid social security number.

• Claim a certain filing status.

• Be a US citizen or foreign resident year round.

The Earned Income Credit is one of our favorites because it 1. rewards and recognizes the rigor involved in working for a living; 2. is a REFUNDABLE CREDIT, which means it can generate a refund on its own; 3. provides a tax-free “pay raise” since a major component of the calculation is compensation earned while working; and 4. is the target of a recent change in tax legislation caused by a pandemic.

The amendment allows a taxpayer to elect to use his or her earned income in 2019 to determine the EIC 2020 when a taxpayer’s earned income in 2019 is greater than his or her earned income in 2020. The EIC worksheet (available at www .irs.gov) provides guidance on this calculation. An example illustrates the good news that arises as a result of this optional provision. A person whose earned income fell to $ 9,000 in 2020 after reporting earned income of $ 19,000 in 2019 will find that the maximum CIE of $ 6,660 for 2020 is almost $ 2,600 higher than the CIE calculated in 2019. using the figure of $ 9,000. Remember that this is an optional provision. If you benefit from the election described, insert the letters “PYEI” and the 2019 income number on the dotted line next to line 27 of Form 1040.

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