Neither the earned income tax credit nor tax brackets are straightforward issues with one-size-fits-all requirements. Combining the two complicates things even more. The EIC doesn't only depend on your income. You might fall into a very low tax bracket, theoretically making you eligible for the highest EIC, but if you don't meet other requirements, you won't benefit.
Tax brackets determine what percentage of your income you must pay in taxes. The more you earn, the greater percentage you must pay. Because the earned income tax credit helps low-income and middle-income families make ends meet, the higher your bracket, the less likely you are to qualify for a high EIC – or to be eligible for the credit at all.
Tax brackets vary depending on your filing status. If you're married, you and your spouse would have to fall into a 15 percent tax bracket to be eligible for the highest credit. The EIC earnings limit for a married couple, assuming you have several dependent children, is $50,270 as of the 2012 tax year, and the 15 percent tax bracket for couples filing jointly ranges from $17,400 to $70,700. If you're not married and you file a single return, the income limit for the EIC drops to $45,060, but this is only if you have several children. An income of $45,060 puts you in a 25 percent tax bracket as a single taxpayer – but if you have dependent children, you probably won't file a single return.
The highest EICs go to taxpayers who are supporting children. If you're unmarried and you have several dependents, your filing status would probably be head of household. This doesn't change the EIC income limits, but it does affect your tax bracket. If you're a single parent with three children, and if you earn less than $45,060, you qualify for the highest EIC. If you earn $45,060 as head of household, you're still in a 15 percent tax bracket – not 25 percent – even though you're unmarried, because different tax rules apply to head of household filers.
EIC rules and requirements don't stop with income and dependents. In order to claim the EIC, you must have earned income from a job or self-employment, and your passive or unearned income from investments and savings can't exceed $3,200 a year. If you're married, you and your spouse can't file separate married returns. If your parents can claim you as a dependent, you're out of luck – you can't claim the EIC. A dependent is someone under the age of 19 – or 24 if the child is a full-time college student student – who doesn't provide more than half of his own financial support, and who lived with his parents or guardian for more than half the year. If your relationship with your parents falls into any of these perimeters, you're their dependent. If you’re supporting three or more children who meet these rules, you'll earn the highest EIC for your income.
The Bottom Line
Although you don't have to have children to qualify for the EIC, you'll receive the smallest credit if you don't have children. The highest credit – $5,891 as of 2012 – goes to taxpayers with three or more dependent children who fall into a 15 percent tax bracket. This equates to income of no more than $50,270 if you're married, or $45,060 if you're not and you file as head of household.