IRS Updates Questions and Answers about the Tax Year 2021 Earned Income Tax Credit

A1. The Earned Income Tax Credit is a tax credit that provides a tax break for low- to moderate-income workers and families.  A tax credit usually means more money in your pocket.  It reduces the amount of tax you owe. The Earned Income Tax Credit may also give you a refund if you don’t owe tax.

A2. For purposes of the Earned Income Tax Credit, “earned income” generally means taxable wages, salaries, tips, and other taxable employee pay, and net earnings from self-employment.

Employee compensation is earned income only if it is taxable.  This means that nontaxable employee pay, such as certain dependent care benefits and adoption benefits, isn't earned income.  There is an exception for nontaxable combat pay, which you can choose to include in earned income.

For more information about earned income, see Publication 596, Earned Income Credit.

A3. For 2021, the Earned Income Tax Credit generally is available to the following eligible taxpayers who are at least 19 years old without qualifying children:

• Individuals who have earned income of less than $21,430.
• Spouses filing a joint return who have earned income of less than $27,380.

Note: For more information about who is a qualifying child, see Qualifying Child Rules.

A4. Generally, if you were at least 19 years old, did not have qualifying children, and had earned income, you might qualify for the Earned Income Tax Credit when you file your tax year 2021 tax return. However, certain students under age 24 don't qualify. See Q 16. Can a student claim the Earned Income Tax Credit for 2021?

For 2021, there are special exceptions for some taxpayers who were 18 years old. If you were 18 years old in 2021, did not have qualifying children, had earned income, and were homeless in 2021 or formerly in foster care, then you might qualify for the Earned Income Tax Credit when you file your tax return for 2021. 

Also, for 2021 only, the Earned Income Tax Credit now has no age limit cap for eligible taxpayers without qualifying children.

Prior to 2021, the Earned Income Tax Credit for those without qualifying children was only available to people ages 25 to 64.

Note: Before including the Earned Income Tax Credit on your tax return, be sure that others – such as your parents – cannot claim you as a dependent. If others can claim you as a dependent and you don’t indicate this on your tax return, it can cause significant processing delays for you or others. You may owe the IRS if you claim deductions or credits to which you weren’t entitled.

A5.  Yes.  You (and your spouse, if married filing a joint return) need to have a valid SSN issued by the due date of your return (including extensions) in order to be eligible to claim the Earned Income Tax Credit. 

Note: A taxpayer’s SSN is valid for purposes of claiming the Earned Income Tax Credit unless the SSN does not authorize the taxpayer to work and it was issued solely to apply for or receive a federally funded benefit, such as Medicaid.  For more information, see Publication 596, Earned Income Credit.

A6. No, but the amount of Earned Income Tax Credit that you could be eligible to claim will be less if your qualifying children do not have valid SSNs. To be eligible to claim the increased Earned Income Tax Credit for your qualifying children, your children need to have valid SSNs.

Specifically:

• For each of your qualifying children with a valid SSN (for up to 3 children), the amount of your Earned Income Tax Credit increases. 
• If none of your qualifying children have valid SSNs, you still could qualify for the smaller Earned Income Tax Credit that is available to workers without qualifying children.

Note: For more information about who is a qualifying child, see Qualifying Child Rules.

A7. There are no age requirements for claiming the Earned Income Tax Credit if you have one or more qualifying children.

A8.  The earned income limits for taxpayers with qualifying children are as follows:

• $42,158 ($48,108 if married filing a joint return) if you have one qualifying child with a valid SSN.
• $47,915 ($53,865 if married filing a joint return) if you have two qualifying children with valid SSNs.
• $51,464 ($57,414 if married filing a joint return) if you have three or more qualifying children with valid SSNs.

Note: For more information about who is a qualifying child, see Qualifying Child Rules.

A9. Generally, any refund you receive from your federal income tax return cannot be counted as income when determining if you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. These programs also cannot count any federal income tax refund you receive as a resource for purposes of determining eligibility for at least 12 months after you receive them.

A10. In 2021, the maximum Earned Income Tax Credit for those without qualifying children is $1,502, up from $538 in 2020.

A11. Yes, you may be eligible for the Earned Income Tax Credit in tax year 2021 if your investment income is $10,000 or less.  After 2021, the $10,000 limit is indexed for inflation. The limit for tax year 2020 was $3,650.

A12. Prior to 2021, many married taxpayers had to file jointly with their spouse to claim the Earned Income Tax Credit. Beginning in 2021, married but separated spouses who do not file a joint return may qualify to be treated as not married for Earned Income Tax Credit purposes.

To qualify, the spouse claiming the credit must have a qualifying child living with them for more than half the year.

The spouse claiming the credit must also meet one of the following conditions:

• Did not live in the same household as the other spouse for at least the last six months of the year, or
• Was legally separated according to their state law under a written separation agreement or a decree of separate maintenance, and did not live in the same household as their spouse at the end of the tax year.

Married taxpayers who meet the requirements to claim the Earned Income Tax Credit on a separate return should check the appropriate box at the top of Schedule EIC and attach it to their Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors. 

A13. To be considered a qualified homeless youth for purposes of the Earned Income Tax Credit, the individual must be at least age 18 and must certify that they are an unaccompanied youth who is either homeless or at risk of homelessness, and self-supporting.  Qualified homeless youth certify that they meet these requirements and all other requirements to claim the Earned Income Tax Credit by checking the box on line 27a on Form 1040, U.S. Individual Income Tax Return.

A14. To be considered a qualified former foster youth for purposes of the Earned Income Tax Credit, the individual:

• Must be at least age 18,
• Was, on or after age 14, in foster care under a plan administered under the Social Security Act; and
• Consents to disclosure of such information from the foster care agency to the IRS. The individual provides consent by checking a box on Form 1040, U.S. Individual Income Tax Return.

A15. Yes. For 2021, eligible taxpayers can choose to figure the Earned Income Tax Credit using their 2019 earned income if it was higher than their 2021 earned income, even if they did not have any earned income in 2021. In certain instances, this option will result in a larger credit.

Taxpayers who did not file a return for tax year 2020 or 2021 or who did not claim the Earned Income Tax Credit on their 2020 or 2021 return because they had no earned income in those years may file an original or amended return to claim the Earned Income Tax Credit using their 2019 earned income, if they are otherwise eligible to do so.

Note: Taxpayers may not use their 2020 earned income to calculate the Earned Income Tax Credit on their 2021 return.

A16.  Generally, for 2021, a specified student below age 24 is not eligible to claim the Earned Income Tax Credit without a qualifying child.

Exception: A specified student may be eligible to claim the Earned Income Tax Credit for 2021 without a qualifying child prior to age 24 if the student was either:

• A qualified former foster youth or qualified homeless youth who was at least 18 years old and satisfies the other requirements for claiming the Earned Income Tax Credit, or
• A married specified student who is filing jointly with a spouse who is otherwise eligible for claiming the Earned Income Tax Credit.

A17. For Earned Income Tax Credit purposes, a specified student is an individual who was enrolled in a program that leads to a degree, certificate, or other recognized educational credential and carried at least one-half the normal workload for a course of study during at least 5 calendar months of the year or an academic period, if longer. Both full months and partial months count towards the 5-month requirement, and the months do not need to be consecutive. For more information on whether your educational program or course load meets the qualifications for you to be a specified student, see the Instructions for Form 8863.