Eligibility for the 2021 Earned Income Credit (1/2)

The IRS recently highlighted special 2021 rules for the credit that significantly increases the number of Americans eligible to claim the EITC. If you have earned income (such as wages, tips or self-employment earnings) and low to moderate income overall, this credit could dramatically reduce your tax or entitle you to a tax refund. Here are several key changes to the EITC that apply only for tax year 2021:

HIGHER INCOME LIMITS FOR CHILDLESS WORKERS: Single tax return filers with no children and adjusted gross incomes (AGIs) of up to $21,430 may qualify for the 2021 EITC. For childless married couples filing joint returns, the 2021 AGI limit is $27,380. Both of these AGI thresholds are almost $6,000 higher than the 2020 limits.

HIGHER CREDIT AMOUNTS FOR CHILDLESS WORKERS: The maximum EITC for filers without children is $1,502, nearly three times higher than the 2020 maximum.

EXPANDED AGE RANGE FOR CHILDLESS WORKERS: Ordinarily, workers without dependent children may only claim the EITC if they are of age 25-64. For 2021, all workers age 19 and up (and some 18-year-olds) are eligible for the EITC, with the exception of full-time students under age 24.

INCREASES FOR WORKERS WITH QUALIFYING CHILDREN: The EITC income limits and maximum credit amounts for filers with 1, 2, or 3 or more qualifying children are all slightly higher in 2021 than in 2020. The highest possible 2021 credit is $6,660.

CREDIT MAY BE BASED ON PRE-PANDEMIC INCOME: A special 2021 rule allows filers to use their 2019 earned income to figure their EITC, if their 2021 earned income was lower. This rule helps those who received reduced wages or unemployment benefits due to the pandemic.

You may claim the EITC even if you owe no tax, in which case you will receive the credit as an IRS refund. However, you MUST file a 2021 tax return to receive the credit. If you are unsure how to claim the credit, a tax professional can help you complete a return and file it electronically for faster processing.