Generally, tax credits such as that for children are non-refundable, meaning the unapplied amount cannot be returned as cash. But the earned income tax credit (EITC) is refundable, and some qualified taxpayers can receive tax rebates sometime after filing.
Earned income is defined as any remuneration received as compensation for work, that includes wages, salaries, tips, gratuities, net income from self-employment, gross earnings from statutory employment, disability benefits granted by the employer prior to retirement. Incomes not worked for do not fall under the EITC, such as social security, unemployment benefits or worker’s compensation.
To be eligible for the credit, a filer’s income must be less than $12,590 if single and without children; $33, 241 if with one child, and $37,738 if with more children. Spouses filing jointly can add $2,000 and still be eligible.
Credits that may be granted can be as high as $4,716 for taxpayers with two or more children, $2,853 for those with one child, and $428 for eligible worker with none. The amounts are inflation-adjusted annually.
However, couples filing separately cannot claim the EITC. Childless couples must be at least 25 years old but below 65; not any taxpayer’s dependent, and lived in the US for more than half the taxable year.
The children of taxpayers claiming credits must be below 19 years old, resided with the taxpayer for more than six months of the year, and with a valid Social Security number. A permanently disabled child is eligible no matter his age, and a student is eligible until age 24.
Sons, daughters, stepchildren, adopted children, brothers, sisters, stepbrothers/sisters, grandchildren all qualify for credit. When a child’s custody is split between separated parents, the parent with whom the child lived for over six months can claim the credit.