The earned income tax credit, commonly referred to as the EITC, is a refundable tax credit designed to benefit workers with low or moderate incomes. It could put up to $5,891 back into your pocket for the 2012 tax year, if you qualify. The primary qualification for the EITC, however, is earned income. That usually means you must have earned money from working -- but if you didn't work, you can still qualify under certain specific circumstances.
Married Filing Jointly
If you did not work during the entire year, you can still qualify for the EITC if you are married and your spouse had earned income. You must file your federal income tax return using the married filing jointly filing status. You don't have to be married for the entire year. The Internal Revenue Service considers your marital status as of the last day of the year to be your marital status for the entire year. If you got married on December 31, and your spouse had earned income and meets the other qualifications, you can get the EITC.
You might have not worked for the entire year because your union was on strike. The Internal Revenue Service considers strike benefits paid to you by your union to be earned income, and you can use those strike benefits to qualify for the EITC.
Early Disability Retirement
If you took early retirement due to a disability, you can use the taxable benefits paid to you from your employer's disability retirement plan to qualify for the EITC until you reach minimum retirement age. Once you reach retirement age, your pension payments no longer qualify for the EITC. Only benefits from your employer's disability retirement plan qualify toward the EITC. Payments you receive from a disability insurance policy that you paid for yourself don't qualify as earned income.
You, your spouse, if you are married, and your qualifying children must each have a Social Security number before you can qualify for the EITC. If you are married and file separate returns, you are ineligible for the EITC. You can't claim the EITC if you have investment income of more than $3,200. Finally, if your adjusted gross income exceeds maximum limits, based on your marital status and number of qualifying children, you don't qualify. For example, if you are not married and have one qualifying child your maximum AGI for the 2012 tax year is $36,920.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.