Earned Income Credit

The Earned Income Credit (EIC or EITC) is a refundable federal tax credit for individual’s low-to moderate income. The credit is based on multiple factors such as, the filing status, income limits, family size, etc. If you have children or qualifying dependents, you may receive an additional credit.

Types of Earned Income:

There are many types of Earned Income. The income can come from wages, salaries, tips, gig work income, income from self-employment, benefits from union strikes, and certain types of disability benefits. Earned income doesn’t include interest and dividends income, pensions or annuities, social security income, alimony, unemployment compensation and child support.

Earned Income Limits and Credits

For 2021, the maximum amount of credit you can claim on the tax return:

  • No qualifying children: $1,502 – Maximum AGI of $21,430 ($27,380 if MFJ)
  • 1 qualifying child: $3,618 – Maximum AGI of $42,158 ($48,108 if MFJ)
  • 2 qualifying children: $5,980 – Maximum AGI of $47,915 ($53,865 if MFJ)
  • 3 or more qualifying children: $6,728 – Maximum AGI of $51,464 ($57,414 if MFJ)
  • The investment income limit reported on the tax return must be less than $10,000.

For 2022, the maximum amount of credit you can claim on the tax return:

  • No qualifying children: $560 – Maximum AGI of $16,480 ($22,610 if MFJ)
  • 1 qualifying child: $3,733 – Maximum AGI of $43,492 ($49,622 if MFJ)
  • 2 qualifying children: $6,164 – Maximum AGI of $49,399 ($55,529 if MFJ)
  • 3 or more qualifying children: $6,935 – Maximum AGI of $53,057 ($59,187 if MFJ)
  • The investment income limit reported on the tax return must be less than $10,300.

EITC Assistant

To check if you qualify for the credit, you can use the EITC Assistant tool. Use the link below to access the tool on the IRS website.

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-assistant

NJ Earned Income Credit

To qualify for the New Jersey Earned Income Credit, the taxpayer must qualify for the federal EITC and be a NJ resident who works or earns qualified income. In 2022, the minimum age to be eligible from the credit went down to the age of 18 years old (the previously age minimum was 21 years old), and seniors over the age of 65 without any dependents also now qualify. The NJ EITC is the highest state credit in the U.S. (40% of the federal EITC).

NJ Earned Income Limits and Credits

The adjusted gross income limits are the same as the federal limits per child. For 2021, the maximum amount of state credit you can claim on the NJ tax return:

  • No qualifying children: $601
  • 1 qualifying child: $1,447
  • 2 qualifying children: $2,392
  • 3 or more qualifying children: $2,691

Resources:

 https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit-eitc

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-and-earned-income-tax-credit-eitc-tables

https://www.nj.gov/treasury/media/njeitc/

https://www.nj.gov/treasury/taxation/eitc/eitcinfo.shtml

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