For the first time this year, millions of Americans can qualify for a particularly generous tax credit—the Earned Income Tax Credit (EITC)—thanks to increased eligibility requirements.
“The EITC has made important changes to help reach more hardworking families this year,” IRS Commissioner Chuck Rettig said in a statement. “We urge people potentially eligible for this valuable loan to read the rules; many people lose sight of this every year and leave money on the table.”
Historically, without expansion, 1 in 5 EITC-eligible Americans do not apply, prompting the Internal Revenue Service to hold an annual EITC Awareness Day—January 28 this year—to make sure taxpayers don’t miss their chance.
If your marital status has changed, you are in the military, disabled, rural, grandparent, or Native American, you may be eligible for this loan.
More workers without children may also qualify for EITC through higher income thresholds, filing status, and look-back choices. Here’s what you should know.
Taxes/ Changes to Earned Income Tax Credit make more taxpayers eligible.
Retirees and young workers are now eligible
In the past, EITC for those with no dependents could only be obtained by people between the ages of 25 and 64. In tax year 2021, this is not the case. Single taxpayers with no children aged 19 or older with income less than $21,430 and joint taxpayers with no children with income less than $27,380 are now eligible to apply. There is also no upper age limit for the loan if you have earned income.
The maximum EITC for such payers has also increased to $1,502 from $538 in 2020.
New income thresholds
“If you applied last year and your income was just above the threshold to qualify for this loan, know that the income threshold has increased,” said Manuel Dominguez, senior tax research analyst at H&R Block, in a webinar hosted by the National League consumers (NCL). “And now you may be eligible for that loan this year.”
The income threshold has also increased for cohabiting spouses with children. In 2020, the income threshold was $56,844 with a maximum loan of $6,660, and this year the maximum income is $57,414 with a maximum loan of $6,728.
Elections backwards can help you qualify
“If your income in 2019 is higher than your income in 2021, then [reverse period selection] … using 2019 income will allow you to claim a higher earned income tax deduction,” Dominguez said.
To take advantage of this option, taxpayers must have earned income through work or other sources. Lookout elections help workers get more credit if they earned less in 2021 or received unemployment income instead of their regular paycheck.
Other key changes
taxes / You may qualify for Earned Income Tax Credit this year due to key changes.
Certain changes in the law expand the amount of EITC for the 2021 tax year, as well as for subsequent years.
In previous years, credit was not provided to persons in separate marriages. This year and beyond, those who are separated may qualify for the deduction if they meet other requirements.
People with investment income up to $10,000 may receive a deduction. In 2020, this limit will be $3,650. In subsequent tax years, the limit will be adjusted for inflation.
Finally, payers with children may qualify for credit even if their children do not have a Social Security number. If payers themselves have Social Security credit, they may qualify for credit. This was not the case in the past.
Expect EITC return by early March
If your refund is partly or wholly based on EITC, by law the IRS cannot issue those payments until mid-February—even if your refund includes other non-EITC loans.
This delay is done to prevent fraud and errors. The IRS expects refunds to bank accounts or debit cards for the earliest applicants to arrive in the first week of March.
Taxpayers can track refunds using the agency’s «Where is my refund?» on the IRS.gov website or the IRS2Go app. These tools will provide information on the earliest EITC returns by February 19th.