What is the Earned Income Credit?

A special federal earned income credit, known as the earned income credit or EIC, is available to lower-income taxpayers who have at least some earnings from personal services during the year. For 2003, the federal earned income credit is available to most workers between the ages of 25 and 64 with an adjusted gross income (AGI) of less than $11,230 ($12,230 if married filing jointly) if they have no qualifying children. Workers with one qualifying child may get the credit if their AGI is less than $29,666 ($30,666 if filing jointly), or less than $33,692 ($34,692 if filing jointly) if they have more than one qualifying child.

However, if you have investment income of $2,550 or more, you won't qualify for the federal earned income credit. Investment income includes taxable and nontaxable interest and dividends, capital gains, net income from rental of personal property, net royalty income, and net income from passive activities shown on Schedule E, including real estate rentals (see IRS Publication 596, Earned Income Credit, if you are on the borderline and need to know exactly which lines on Schedule E to look at in determining your passive income).

All of these ceiling amounts are adjusted for inflation each year.

• Whether you are eligible for advanced earned income tax credit.
• How the advanced earned income tax credit is computed.

We Help You Learn What is the Earned Income Credit.