Changes to 2012 Tax Season - Earned Income Tax Credit (EITC)

It’s getting close to that dreadful time of year, tax season!! There has been a lot of doubt with this upcoming tax season because a lot of the tax credits and laws that were in place during the Bush era were due to expire in 2010 and although some were extended, many were not. As a tax professional I feel it’s my duty to educate the public on such changes, therefore, during this week I’m going to post an article daily regarding such changes, and hopefully we’ll be done by the end of the week!!

The first one I’m going to discuss, is the Earned Income Tax Credit (EITC). Many people receive this credit and don’t even realize it. EITC, the Earned Income Tax Credit, sometimes called EIC is a tax credit to help you keep more of what you earned. It is a refundable federal income tax credit for low to moderate income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file.

For 2011 tax returns, the maximum credit you could receive is $5,751 (this is an increase from the 2010 tax returns, the maximum credit was $5,666).

$5,751 with three or more qualifying children
$5,112 with two qualifying children
$3,094 with one qualifying child
$464 with no qualifying children

The maximum adjusted gross income for EIC has increased in all categories for 2011 and availability for families with three or more children stayed the same.

The Tax Relief and Job Creation Act signed into law December of 2010 provides a temporary increase in EITC and expands the credit for workers with three or more qualifying children. These changes are temporary and apply to 2009, 2010, 2011 and 2012 tax years. We don’t know what will happen after 2012, but in the meanwhile, let me give you a preview of the EIC for 2012 (tax season 2013):

$5,891 with three or more qualifying children
$5,236 with two qualifying children
$3,169 with one qualifying child
$475 with no qualifying children

So there you have it, for those of you that qualify and have children…you may be looking at a few more dollars back during the tax season, don’t forget that it’s always based on your Adjusted Gross Income (AGI).

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