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The most frequently asked tax questions related to Credits
For Tax Payers
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The income level at which the credit phase-out begins is increased to $400,000 for taxpayers filing married filing jointly and $200,000 for all others. The credit continues to phase out at a rate of $50 for every $1,000 that AGI exceeds the threshold amounts.
The refundability of the credit was also modified so that the earned income threshold is reduced to $2,500.
In 2014, You cannot take the credit if either of the following applies: The amount of AGI on Form 1040, line 38 ; Form 1040A, line 22; or Form 1040NR, line 37, is more than $36,000 ($39,000 if head of household; $60,000 if married filing jointly
The saver’s credit can be claimed by:Married couples filing jointly with incomes up to $59,000 in 2013 or $60,000 in 2014;
Heads of Household with incomes up to $44,250 in 2013 or $45,000 in 2014; and Married individuals filing separately and singles with incomes up to $29,500 in 2013 or $30,000 in 2014
Must have earned income, such as wages, tips or the income from running a business or farm. Most other types of income, such as retirement pensions, though usually taxable, do not count as earned income.
Must have a Social Security number that is valid for employment for self, spouse and any qualifying children.
A person can get the credit even with a small amount of investment income, such as interest from a bank account. However, the amount of investment income is limited to $3,400.
The filing status used must be single, head of household, married filing jointly or qualifying widow or widower. A taxpayer who files as married filing separately cannot get the credit.
Generally, must be either a U.S. citizen or resident alien. Cannot be a qualifying child of another person. Cannot file Form 2555 or Form 2555-EZ.
Individuals may receive refunds more than what was withheld in federal withholding taxes from their wages.
For the 2016 Tax Year
Earned Income and adjusted gross income (AGI) must each be less than:
$47,955 ($53,505 married filing jointly) with three or more qualifying children $44,648 ($50,198 married filing jointly) with two qualifying children $39,296 ($44,846 married filing jointly) with one qualifying child $14,880 ($20,430 married filing jointly) with no qualifying children
Tax Year 2016 maximum credit: $6,269 with three or more qualifying children $5,572 with two qualifying children $3,373 with one qualifying child $506 with no qualifying children
Investment income must be $3,400 or less for the year.
Relationship test. The child is the taxpayer’s: •Son or daughter, including an adopted child or child placed for adoption •Stepchild or grandchild •Foster child placed by an authorized placement agency or court •Brother, sister, stepbrother, stepsister, half brother, half sister, or •A descendant of any of them
Age test. At the end of 2016, the child was: •Younger than the taxpayer or the taxpayer’s spouse if filing a joint return and younger than 19 •Younger than the taxpayer or the taxpayer’s spouse if filing a joint return and younger than 24 and a full-time student, or •Any age if permanently and totally disabled
Residency test. The child lived with the taxpayer or the taxpayer’s spouse if filing a joint return in the U.S. for more than half of 2016.
Joint Return test. A qualifying child who files a joint return can only do so to claim a refund with neither the child nor child’s spouse being required to file.
More than one person cannot claim the same qualifying child to claim EITC. If a child meets the rules to be a qualifying child of more than one person, only one person can use that child to claim the EITC. Also, if the child qualifies for both a parent and another person, the other person can only get the credit by having a higher AGI than the parent.
Lived in the U.S. for more than half of 2016, at the end of 2016, was at least age 25, but under age 65, cannot qualify as the dependent of another person.