The Earned Income Credit (EIC) is a federal tax credit that helps reduce an individual’s income tax liability. It is generally available to low-to-moderate income taxpayers with children. However, individuals without children may be eligible for the EIC if their income is low enough.

For the 2023 tax year, to qualify for the EIC, the taxpayer must meet the following requirements:

  • Have earned income during the year which is under $63,350
  • Total investment income must be below $11,000.
  • The taxpayer must have a valid social security number (SSN) by the due date of the tax return
  • The taxpayer must be a U.S. citizen or resident alien
Steps to Calculate the EIC
  • Taxpayers should complete Form 1040 (US Individual Income Tax Return) by reporting their income, deductions, and other credits.
  • If the taxpayer has qualifying children, the return should include a Schedule EIC (Earned Income Credit) disclosure, which reports the child’s name, SSN, date of birth, relationship, and number of months the child lived with the taxpayer.
  • Next, the taxpayer completes the Earned Income Credit Worksheet and calculates their credit amount using the EIC Tables in IRS Publication 596 (Earned Income Credit).
Example EIC Calculation

John Taxpayer is a single parent with one son, Alex, who is eight years old. John is filing as Head of Household (HOH) for the 2023 tax year. John’s earned income on his W-2 is $42,500, and his interest income on his savings account is $309.

John completes Schedule EIC to report his son as a dependent. John’s total adjusted gross income (AGI) for the year is $42,809. John looks at the EIC Tables in Publication 596 and finds his income range of $42,800 to $42,850. With one qualifying child and HOH filing status, John’s EIC amount is $597. John reports the $597 EIC amount on Line 27 of his Form 1040.

Please see our video here for a full tutorial on this fact pattern, which includes all of the forms and required schedules.

Other Video Tutorials

Please visit our video links below for more tutorials on the EIC for taxpayers:

Other Information

Taxpayers looking for more information on the Earned Income Credit can review IRS Publication 596 (Earned Income Credit) and the IRS website.