The earned income credit (EIC) may be claimed not only by workers with qualifying children who meet the tests below, but also, in limited cases, by childless workers. For 2012, the maximum earned income credit is $3,169 if you have one qualifying child, $5,236 if you have two qualifying children, $5,891 if you have three or more qualifying children, and $475 if you do not have a qualifying child. There is a phaseout of the credit (25.11). You look up the credit amount in IRS tables included in the tax form instructions. The EIC is “refundable” you will receive a refund from the IRS if the credit exceeds your tax liability.
You may claim the EIC on a 2012 return if you:
A qualifying child is your son, daughter, adopted child, grandchild, stepchild, or descendents of any of these who at the end of 2012 is under age 19 or under age 24 and a full-time student (enrolled full time during any five months), or any age if permanently and totally disabled. The qualifying person must live with you for over half the year. Your brother, sister, step- or half-brother or step- or half-sister, or their descendents, who meet the age 19 or 24 test and live with you more than half the year also qualify if they are younger than you (or your spouse if you file jointly) or are permanently and totally disabled. A foster child who lives with you for more than half the year qualifies if the child was placed with you by a court order or by an authorized placement agency.
The qualifying child must have lived with you in your main home in the U.S. for more than six months. Temporary absences for school, vacation, medical care, or detention in a juvenile facility count as time lived at home.
A person in the U.S. Armed Forces who is stationed outside the U.S. on extended active duty is treated as maintaining a main residence within the U.S.
If you are married, you must file a joint return with your spouse to claim the credit. However, if your spouse did not live in your household for the last six months of the year, and you maintained a home for a child who lived with you for more than half of the year, you may claim the credit as a head of household (1.12).
A person is permanently and totally disabled if: (1) he or she cannot engage in any substantial gainful activity because of a physical or mental condition and (2) a physician determines that the condition has lasted or is expected to last for at least a year or lead to death.
“Tie-breaking” rules determine who can take the EIC if a child is a qualifying child of more than one person.
If both parents are eligible to claim the credit for the same qualifying child and they do not file a 2012 joint return, the parent with whom the child resided for the longer period during the year may claim the child. If the child lived with each parent for the same amount of time, the child will be treated as the qualifying child of the parent who had the higher adjusted gross income (AGI) for 2012.
If a parent and one or more nonparents are otherwise entitled to claim the child as a qualifying child, only the parent may claim the credit for the child. If none of the persons otherwise entitled to treat the child as a qualifying child are the child’s parent, the child will be treated as the qualifying child of the person who had the highest AGI for 2012.
If your child was married at the end of 2012, he or she is your qualifying child only if you can claim an exemption for the child under the rules at 21.3, or you would be so entitled except that the noncustodial parent is given the exemption under the rules at 21.7. However, if your child files a joint return, he or she is not your qualifying child unless the joint return is filed only as a refund claim.
An individual who is a nonresident alien for any part of the year is not eligible for the credit unless he or she is married and an election is made by the couple to have all of their worldwide income subject to U.S. tax.
If you do not have a qualifying child, you may claim the EIC on a 2012 return if you:
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