Earned Income Credit

The earned income credit is a special credit for certain people who work. If you qualify for it, the earned income credit reduces the tax you owe. Even if you do not owe tax, you can get a refund of the credit. Also, you may be able to get part of the credit added to your pay instead of waiting until after the end of the year.

You cannot take the credit if your earned income (or modified adjusted gross income, if greater) is:

• $10,380 or more if you do not have a qualifying child,
• $27,413 or more if you have one qualifying child, or
• $31,152 or more if you have more than one qualifying child.

Earned income. Earned income includes your:

• Wages, salaries, tips, and other pay, and
• Net earnings from self-employment minus the amount you claimed (or should have claimed) on Form 1040, line 27, for one-half of your SE tax.

Earned income for a minister with an approved Form 4361. If you have earnings from qualified services that are exempt from SECA (have an approved Form 4361), amounts you received for performing ministerial duties as an employee are earned income. This includes wages, salaries, tips, and other employee pay. It also includes pay that is not taxed, such as the housing and utility allowance received as part of your pay for services as an employee.

Amounts you received for nonemployee ministerial duties are not earned income. This includes fees for performing marriages, baptisms, and honoraria for delivering speeches.

If you had nonministerial duties, any net earnings from self-employment, minus one-half of your SE tax, or any pay received as an employee is earned income.

Earned income for a minister whose income from qualified services is not exempt from SECA. Earned income includes your net earnings from self-employment plus any pay you received for nonministerial duties minus your Form 1040, line 27, amount for one-half of SE tax.

Your net earnings from self-employment includes those net earnings from qualified services. See Figuring Net Earnings From Self-Employment for SE Tax, earlier. Net earnings also includes net earnings from self-employment related to nonministerial duties.

Earned income for a member of a recognized religious sect with an approved Form 4029. If you have an approved Form 4029, all wages, salaries, tips, and other employee compensation are earned income. Amounts you received as a self-employed individual are not earned income. Also, losses from Schedules C, C-EZ, or F cannot be subtracted from wages on line 7 of Form 1040.

More information. For the detailed rules on this credit, get Publication 596. To figure the amount of your credit, you can either fill out a worksheet or have the IRS compute the credit for you. You may need to complete Schedule EIC and attach it to your tax return. For details on getting part of the credit added to your pay, get Form W-5, Earned Income Credit Advance Payment Certificate, from your employer or the IRS.

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