Sunday, December 20, 2009

Earned Income Tax Credit going up

Earned Income Tax Credit (EITC) is a benefit for taxpayers who work and have earned income. The credit reported on From 1040 line 64 and is treated as a tax payment to be added to any federal income tax withholding. The amount of EITC depends on, earned income, adjusted Gross Income, filing Status, and number of qualifying children (either none, one, or two).

American Recovery and Reinvestment Act (ARRA) has adjusted the EITC for 2009 and 2010 to
  • cover three children
  • increase benefits 5% on the first $12,570 of earned income
  • increase the beginning of the phase out range for the credit for all married couples
The maximum credit for 2009 is $5,657 compared to $4,824 in 2008:
  • $5,657 - three or more qualifying children (N/A in 2008)
  • $5,028 - two qualifying children ($4,824 in 2008)
  • $3,043 - one qualifying child ($2,917 in 2008)
  • $457 - no qualifying child ($438 in 2008)
EITC is disallowed if the taxpayer's investment income is more than $3,100 ($2,950 was the maximum in 2008).

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