It’s time to revisit your income and financial information for tax year 2023. Once you reach a specific income threshold, you are required to pay federal income taxes, which can reduce your earnings.
If you’re looking to lighten your financial load, the Internal Revenue Service provides a range of tax credits that you may qualify for, including the earned income tax credit, or EITC.
Understanding the Earned Income Tax Credit
Income that you receive can come from working for an employer or from operating your own business or farm.
This income is also subject to FICA taxes, which help fund Social Security and Medicare, adding to the tax obligations on earned income.
Here are some important points to consider in order to determine if you are eligible for the EITC 2023:
- Income can come from various sources such as wages, self-employment earnings, union benefits, and other sources.
- The EIC 2023 is structured as a refundable tax credit to assist individuals with lower to moderate income levels.
- This year, the credit can vary from $600 to $7,430.
- The amount you receive will vary based on factors like your income, tax-filing status, and the number of children you have.
- Long-term disability benefits are payable prior to reaching the minimum retirement age, excluding certain types of income such as capital gains, dividends, alimony, Social Security, or unemployment benefits.
- If you do not have children, you may be eligible for a reduced tax credit. Every eligible child you claim will raise the earned income and adjusted gross income (AGI) thresholds.
Income tax credit for eligible individuals Income Limits
To qualify for the earned income tax credit, your income must not exceed specific limits, which depend on your filing status and the number of qualifying children you have claimed. Here’s a breakdown of the earned income and AGI limits in the table:
Income Limits for Tax-Filers for Earned Income Tax Credit in 2023
Low-income taxpayers receive an additional credit on their tax return for earning income and supporting their families. Families may be eligible for an increased credit if they have qualifying children. For certain taxpayers, this tax break could potentially be valued at up to $7,340.
Am I eligible for the Earned Income Tax Credit?
Utilizing a tax credit is a swift method to lower tax liability as it directly reduces the amount of tax owed. To be eligible for the IRS earned income credit, you need to have received income during the tax year. Here are the additional steps you need to take to meet the qualifications as outlined on IRS.gov:
- I have been employed and made less than $63,398.
- Ensure that your investment income does not exceed $11,000 for the tax year 2023.
- Ensure you have a valid Social Security number by the deadline of your 2023 return, including any extensions.
- Filing Form 2555, Foreign Earned Income, is not an option.
- Make sure your filing status is not married filing separately.
- To meet the requirement, you need to be a US citizen or resident alien for the entire year.
- Your earned income and AGI must not exceed the limit for your filing status.
- Any dependent you claim must have a valid Social Security number that was issued before the due date for filing your tax return, including any tax extensions for which you qualify.