New earned income credit rules for people with children | Rogersville


Several new rules may allow people with children to qualify for more Earned Income Credit (EIC).

According to the IRS, about 25 million workers and families received about $62 billion in EICs in 2019. The new rules will affect many people. Couples who marry jointly can have up to $57,414 in income and qualify for the IEC in 2021.

A new rule is that parents who file a married case separately and have eligible children can now apply for the (EIC). However, there are several requirements to claim EIC when using this filing status.

The qualifying child must have resided with that parent for more than half of the tax year. In addition, they must either have lived separately from their spouse during the last half of the year, or have a written decree/agreement of separation and have lived separately from the spouse at the end of the tax year.

Following the new tax law, a separately filing taxpayer who separated from their spouse near the end of the tax year (with a written decree) will now be eligible for the EIC. In previous years, a separated spouse who wished to benefit from the IEC had to qualify to apply as head of household. The status of head of family required the taxpayer to live separately from his spouse during the last half of the tax year.

Two other changes apply to taxpayers with qualifying children.

The first change is beneficial if your income was higher in 2019 than in 2021. Since many businesses were still financially impacted by the pandemic, this option will help many people whose income has declined since 2019. 2021 tax, you can look back two years and use 2019 earned income instead of 2021 earned income to calculate the credit. This is an option if 2019 earnings increase the amount of credit that can be claimed.

The second change increased the investment income limit for IEC eligibility. In 2021, you can have investment income of up to $10,000 and qualify for the IEC. Previously, the investment limit was $3,650 to qualify for the IEC.

Generally, the amount of IEC will increase for most people for the 2021 tax year. Some people who were not previously eligible in previous years may now be eligible due to a drop in income due to the pandemic. And people whose incomes have dropped due to the pandemic will have the option of using their income from 2019 to increase their EIC.

If you qualify for the IEC, be sure to compare your 2021 and 2019 income to receive the higher amount of credit. The maximum IEC amount for 2021 is $6,728. Claiming the maximum IEC amount by calculating the amount based on the best year could make a big difference in your refund amount.

If you have already filed your 2021 return, you can file an amended return if you did not claim the maximum EIC you were eligible for.

David Zubler is a tax accountant and registered agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. Email him at

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