Qualifying for the Earned Income Tax Credit

Last Updated on January 27, 2024 by Rachel

The Earned Income Tax Credit (EITC), sometimes called EIC, is a tax credit for workers with low to moderate income. Eligibility for the tax credit is based on various factors including family size, filing status and income. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. The credit is subject to income limitations.

Working seniors without dependents may qualify for the earned income tax credit when they file their 2021 tax returns. The tax credit assists those with low incomes but was previously primarily available to people with young children. The IRS has also scrapped prior years’ age limits for the EITC. Previously, only workers ages 25 to 64 could claim it. This tax season, any worker 19 or older who meets the income guidelines can qualify for the credit, as well as 18-year-olds who are homeless or who have been in foster care.

The Senior Tax Credit, also referred to as the Credit for the Elderly or Disabled, is a federal tax credit that can be applied to your tax returns if you are a senior (or if you have a disability, regardless of your age) and meet certain income requirements. This credit can amount to a significant benefit to qualified seniors as it might cover the amount of any tax you might owe, which could result in a tax refund.

To qualify for EITC you:

To qualify for the senior tax credit, an individual must:

Be 65 or older by the end of the tax year (if younger, the individual must be retired on permanent and total disability, have taxable disability income and have not yet reached the mandatory retirement age)

Be a U.S. citizen or a resident alien (some exceptions apply to non-resident aliens married to U.S. citizens or resident aliens)

Meet certain income limits (as described below)

Must have a Social Security number that is valid for employment

Must have earned income from wages or running a business or a farm

May have some investment income

Generally must be a U.S. citizen or resident alien all year

Can file as married filing separately if you meet eligibility requirements under the special rule

Cannot be a qualifying child of another person

Cannot file Form 2555 or 2555-EZ (related to foreign earned income)

To claim EITC you must file a tax return, even if you do not owe any tax or are not required to file. If you have a qualifying child, you must file the Schedule EIC listing the children with the Form 1040.

According to the IRS, many eligible people miss out on the EITC because they fall below the income threshold requiring them to file taxes, even though they can still file taxes and possibly get the credit in the form of a refund. Others incorrectly believe that receiving the EITC will jeopardize their eligibility for other government benefits. Refunds received via the EITC are not considered income for the purposes of means-tested government benefit programs, such as Medicaid, Supplemental Security Income (SSI), Supplemental Nutritional Assistance Program (SNAP) benefits, Section 8 housing, or other programs with maximum income limits.

To claim the senior tax credit on your federal taxes, you must complete a Schedule R form with your IRS Form 1040A. The Schedule R can be located on the Forms and Publications page of the IRS website.

If you’re married by the end of the tax year, you are generally required to file a joint return in order to claim the credit. However, separate returns can be filed if you did not live with your spouse at any time during the tax year. More information on the process of preparing and filing a Schedule R can be found on the IRS website.

For assistance in preparing the Schedule R or your tax returns in general, the IRS provides a free tax return preparation program, Volunteer Income Tax Assistance (VITA). This program is available to qualifying taxpayers, particularly those over the age of sixty who make $53,000 or less. Under the VITA program, IRS certified volunteers will provide assistance with tax preparation and counseling. To find a VITA volunteer near you, see the VITA locator on the IRS website.

For tax year 2021, the EITC is available to individuals 19 years and older, without qualifying children who earn income up to $21,430. Married couples filing jointly qualify for EITC by earning up to 27,380. This limit goes up depending on the person’s tax filing status and the number of qualifying children in the person’s household. For a married couple filing jointly with three qualifying children, the maximum household income is $57,414. While in the past, the EITC was only available to people between the ages of 25 and 64, now those 65 and over can claim the credit if they have earned income.

Taxpayers may claim a child with a disability or a relative with a disability of any age to get the credit if the person meets all other EITC requirements.

Aside from wages, salaries, or tips, earned income includes earnings from work-for-hire contracts and self-employment. Investment income is also a factor, although for 2021 only, the IRS is capping this at $10,000. So if your earned income falls below the threshold, and you can also claim less than $10,000 in interest and gains on your investments, you could still qualify for the EITC program.

It’s just as important to note what doesn’t count as earned income. This includes Social Security, pensions and annuities, unemployment insurance, EITC refunds, and income from such government benefits programs as SSDI, SSI, and military disabilities.

For people needing assistance in filing their taxes, the IRS’s Tax Counseling for the Elderly program provides free tax services for people aged 60 and older.

Certain states also have their own form of senior tax credits or exemptions that can apply on your state or local tax returns. California, for example, provides a Senior Head of Household Credit. Massachusetts, and other states, also offer Circuit Breaker Tax Credits to qualifying seniors based on real estate taxes or rent paid during the year. Additional information on senior tax credits or exemptions that may be available in your state can be located on the website of your state’s treasury or revenue agency.

Further Considerations

The federal senior tax credit is only applied to the tax return of the filer and, therefore, would not apply if the qualifying senior was listed as a dependent on someone else’s tax returns. However, in some cases it may be advantageous for a senior to be claimed as a dependent as there are other tax benefits that may apply to the filer, including deductions for medical and dental expenses and home care or adult care costs.

For a senior to be considered a dependent on another’s tax returns, the filer must provide over half of the senior’s financial support and the senior must have lived with the filer for a full calendar year, among other factors.

People who claim the EITC often have to wait longer than other filers to start getting refunds — by law, these refunds need to be held until mid-February to allow extra time for the IRS to review the claims. That means even if taxpayers file returns as soon as tax season begins, they typically don’t receive refunds until mid-March.

After that time period, EITC claimants shouldn’t need to wait any longer than other taxpayers to get their money. Generally, most taxpayers will get their refunds in 21 days or less, assuming they file electronically.

Increasing taxes on high-income seniors is not just fair: it’s what’s best for all seniors. Seniors are as dependent as any Oklahomans on the public services that our taxes fund. We need police, fire, and emergency medical services. We need good, safe roads, abundant and accessible sidewalks, and above all a much better public transportation system than any that currently exist in Oklahoma. Many need or will need Medicaid to help pay for nursing homes or in-home care without being a burden on our children.

Income added back:

Estate income (Schedule CB worksheet) – Earned income from an estate, e.g. the estate is in probate, or cannot be settled due to a pending lawsuit; any interest income earned from funds left in the account, or rental income earned from rental property that is part of the estate is included. Generally reported to beneficiaries on a K-1.

Gains included in U.S. Schedule D (not including losses) – CB Worksheet, Part 3., Lines 12 -17

Interest income from U.S. and Massachusetts government bonds, notes and bills – CB Worksheet, Part 2, Line 8

Excluded while calculating total income

Estates – One time distributions that have been probated are not included since they’re not part of federal gross income

Life insurance policies – Proceeds payments are not included since they’re not part of federal gross income

Losses included in U.S. Schedule D

Net worth of assets – Accumulated earnings in an account such as deferred compensation, IRA, etc.

Payments, in-kind payments, or monies received that are otherwise not defined as:

• Wages
• Payments in lieu of wages
• Income
• Other income
• Return of capital
• Gross receipts
• U.S. Series E and Series EE bonds – These are considered investment bonds and do not earn interest each year. Instead, the income is recognized federally only at the time the bond matures and the holder cashes it in. In years prior to maturity, there would be no income.