New definition of earned income. For tax years after 2001, earned income will no longer include employee compensation that is nontaxable. This will change Rule 6 and Rule 14.

Elimination of modified adjusted gross income (AGI). For tax years after 2001, you will no longer need to figure modified AGI. Your EIC will be figured using your AGI, not modified AGI. This will change Rule 15.

New rules for persons with same qualifying child. For tax years after 2001, new rules will be used to determine which person can claim the EIC on the basis of a qualifying child when two or more persons have the same qualifying child. This will change Rule 8. For details, see Publication 553, Highlights of 2001 Tax Changes.

New definition of eligible foster child. For tax years after 2001, the definition of an eligible foster child in Rule 7 will change. The child will have to live with you only for more than half of the year, instead of the whole year.

Reduction of EIC by alternative minimum tax eliminated. For tax years after 2001, your EIC will no longer be reduced by the amount of alternative minimum tax shown on your return.

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