Who Can I Claim as a Dependent on Taxes?
From Tax Guide.
Tax Guide · Arab, Alabama
Earned Income Credit (EITC): How It Works
What the federal earned income credit is, who may qualify, why refunds with it can arrive later, and why Alabama has no state earned income credit.
The short answer
What is the earned income credit?
The earned income credit (EITC or EIC) is a federal tax credit for people who work and have low to moderate earnings, and it can reduce the tax you owe or increase your refund.
Because it is a refundable credit, it can produce a refund even when you owe no tax. That is why it matters so much to working families, and also why the IRS reviews it carefully.
Whether you qualify depends on your earned income, your filing status, the number of qualifying children and several other tests. We never assume a person qualifies. We look at the facts first.
Alabama
Does Alabama have an earned income credit?
No, Alabama does not have a state earned income credit; the credit is federal only.
You may still qualify for the federal credit on your federal return, even though your Alabama return has no matching credit. Some other states add a state credit on top of the federal one, but Alabama is not one of them, so you should not expect a state amount.
For the state side of filing, read how to file taxes in Alabama.
Who may qualify
Who qualifies for the earned income credit?
People who have earned income from a job or self-employment, meet the income limits for their situation and have a valid Social Security number may qualify, with or without children.
The IRS sets the income limits and the credit amounts each year, and they depend on how many qualifying children you have. Workers without children may qualify for a smaller version, within age limits. Investment income above a set limit can disqualify you.
Your filing status matters as well. Married people filing separately generally cannot claim the credit, with limited exceptions. The filing status guide explains the choices, and dependents and child-related credits explains who counts as a qualifying child.
- You must have earned income from work or self-employment
- Your income must fall within the yearly limits for your household
- You generally need a valid Social Security number for yourself and any qualifying child
- Your filing status must allow the credit
- A qualifying child must meet relationship, age and residence tests
Refund timing
Why is my refund with the earned income credit late?
By law, the IRS cannot release refunds that include the earned income credit until a set date early in the year, so these refunds usually arrive later than others.
This is a rule for everyone claiming the credit, not a sign of a problem with your return. Even after that date, additional review can add time. Our page on why your refund may be delayed covers the other common causes.
To see where your refund stands, use the IRS refund tool or the links on our My Alabama page.
Avoiding trouble
What happens if the earned income credit is claimed wrongly?
If the IRS decides a credit was claimed incorrectly, it can deny the credit, ask for repayment, and in some cases bar you from claiming it for a period of years.
Honest mistakes happen, most often around who the qualifying child is, income that was reported wrongly or a filing status that does not fit. If you receive a letter questioning the credit, do not ignore it. Keep a copy and call us. There is a response deadline printed on the notice.
Be cautious about anyone who promises a big refund from this credit or asks for a share of it. A trustworthy preparer explains the rules instead of promising a result.
How we can help
Earned income credit help in Arab
Melton Tax Services prepares individual and family returns and can review whether the earned income credit may apply to you.
Our income tax preparation service covers the federal and Alabama returns together. Call 256-586-4635 or use our contact page. We serve Arab and the surrounding area.
Answers
Questions about earned income credit
Do I have to have children to get the earned income credit?
No. Workers without qualifying children may qualify for a smaller credit within age and income limits set by the IRS.
Is the earned income credit taxable?
No. It is a credit that reduces your tax or adds to your refund. It is not counted as taxable income.
Why did the IRS deny my earned income credit?
Common reasons include a child who did not meet the tests, income that did not match IRS records, or a missing or invalid Social Security number. Read the notice and call us before the response deadline.
Can I claim the credit if I am self-employed?
Self-employment income can count as earned income, so you may qualify. The credit depends on your net earnings and the other tests.
Does Alabama have its own version of this credit?
No. Alabama does not have a state earned income credit. Only the federal credit applies.
Read next
Related reading
Why Is My Tax Refund Delayed?
From Tax Guide.
Filing Status Explained: Which One Applies?
From Tax Guide.
How to File Taxes in Alabama
From Tax Guide.
Income Tax Services
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