About EITC
Examples of Earned Income for the Earned Income Credit
Credit Includes:
Taxable Earned Income:
• Wages, salaries, and tips
• Union strike benefits
• Long-term disability benefits received prior to minimum retirement age
• Net earnings from self-employment
• Gross income received as a statutory employee
* Exception: Military combat pay is non-taxable earned income, up to the highest pay level for enlisted personnel. Under a rule change beginning in 2004, such combat pay is for the CTC. Military personnel may choose to count their non-taxable combat pay in determining eligibility for the EITC, if it is advantageous to do so.
If investment income exceeds $2,900, the EITC may not be claimed. Investment income includes taxable interest, tax exempt interest, and capital gain distributions.
Note: Information taken from IRS Publication 596
Does not include:
• Interest and dividends
• Social security and railroad retirement benefits
• Welfare benefits
• Workfare payments
• Pensions or annuities
• Veteran’s benefits (including VA rehabilitation payments)
• Workers’ compensation benefits
• Alimony and Child Support
• Non-taxable foster care payments
• Unemployment compensation (insurance)
• Earnings for work performed while an a penal institution
• Taxable scholarship or fellowship grants counted to determine
eligibility that are not reported on Form W-2
Nontaxable earned income:
• Salary deferrals (for example: under a 401(k) plan
• Military basic housing and subsistence allowances
• Meals or lodging provided by an employer for the convenience of
the employer
• Housing allowance or rental value of a parsonage for the clergy
• Excludable dependent care benefits
• Salary reductions such as under a cafeteria plan
• Anything else of value you get from an employer for services you
performed even if it is not taxable
EITC Benefits for Tax Year 2007 at Various Income Levels
Go to the Center on Budget and Policy Priorities for an Estimator of EITC benefits for Tax Year 2007 at various income levels.
1. Acorn Report Documents Billions in Unclaimed EITC Dollars-www.acorn.org.
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