Question: James and his brother Charles are both full-time students hoping to claim the earned income tax credit (EIC) in 2021, now that the credit percentage for childless workers has increased dramatically. Both brothers had wages in 2021 and neither are dependents of another taxpayer. James is 28, and Charles is 21. Are they eligible for the EIC?
Answer: Three important changes to the EIC guidelines make this credit a potentially exciting option for both brothers. First, for 2021, childless workers and couples, younger workers and senior citizens now qualify for the EIC. Filers who are at least 19 years old, have no qualifying children and have earned income below $21,430 or $27,380 (MFJ) may be eligible for the credit. Second, the credit amount has increased for this filing group. The current maximum credit of $1,502 nearly triples the former credit amount of $538. Although certain unhoused individuals, or those formerly in foster care, are also now potentially eligible, full-time students under age 24 are not. That means Charles, the 21-year-old student, will not qualify for the credit even though his earned income would qualify him. Third, the credit can be based on earned income from 2019 if it is higher than in 2021. Note that unemployment income is not considered earned income for this purpose. James worked part-time in 2021 and qualifies for the EIC, even though he is a student, because he is over age 23. Charles must also choose whether to use 2019 as his earned income year. The IRS earned income and earned income tax credit tables show that his 2019 earned income of $19,800 qualifies him for an EIC of $253, while his 2021 income of $6,450 yields a credit of $983. James will use his 2021 earned income to claim the higher amount and Charles will not receive the credit.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.