2021 TAX FILING

Who is eligible for Earned Income Tax Credit for childless workers?

The American Rescue Plan gave the Earned Income Tax Credit for childless workers a boost for 2021 tax filings in 2022, but they need to file to claim it.

Who is eligible for Earned Income Tax Credit for childless workers?

The Earned Income Tax Credit is a refundable tax credit that is targeted at low- and moderate-income workers. It reduces the amount of taxes filers owe, or can even be collected as a refund.

Workers with kids get a higher starting credit but new modifications in the American Rescue Plan relax some rules and childless workers will be eligible for a much larger credit than before. The maximum credit that taxpayers without children can claim will increase in 2021 from $538 to just over $1,500. But in order to receive the credit, even those who are not legally required to file a tax return must do so to claim the credit.

What are the eligibility requirements for a childless worker?

The basic requirements to claim the Earned Income Tax Credit (EITC) on a 2020 tax return are that you, and your spouse if filing jointly, must have a valid Social Security number, be a US citizen or a resident alien all year, show proof of earned income and have investment income below $3,650 in the tax year you claim the credit. You must also claim a certain filing status, but those filing "married filing separately" cannot claim the EITC this year.

You, and your spouse if filing jointly, must have your main home in the US for more than half the tax year; military bases count but not US possessions. You cannot be claimed as a qualifying child on anyone else’s tax return and be at least 25 years old and under 65 at the end of the tax year. Furthermore, you cannot have foreign earned income.

Childless workers wanting to claim the credit must have both earned income and adjusted gross income (AGI) less than $15,820 for individuals or heads of household (HoH) and $21,710 for joint filers. A special pandemic relief rule for 2020 returns allows those who claim the EITC to choose between using their 2019 or 2020 earnings when filing in this year.

The American Rescue Plan made changes to some of the provisions of the EITC

Under the American Rescue Plan some of the rules were loosened for claiming the EITC. When filing in 2022 taxpayers will be able to once again choose to use 2019 earnings instead of 2021 to claim the credit. The maximum earnings rises to $21,430 for individuals or (HoH) and $27,830 for joint filers. Additionally, the limit of investment income increases to $10,000 from the current $3,650.

The law passed in March also reduces the age threshold for taxpayers with no qualifying dependents from 25 to 19 and eliminates the ceiling at age 64. If certain conditions are met with regards to living arrangements and legal agreements, those with the filing status “married filing separately” will now be able to claim the credit.

In order to check your eligibility, the IRS offers an online EITC Assistant tool that you can use to see if you can claim the credit. As well most tax software used to prepare taxes will walk you through the process and calculate the credit you will receive. The IRS partners with several tax preparers through their Free File program that anyone who earns less than $72,000 can use to do their federal taxes for free.