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Fewer Americans will qualify for this overlooked, but valuable tax credit

 2 years ago
source link: https://finance.yahoo.com/news/fewer-americans-will-qualify-for-this-overlooked-but-valuable-tax-credit-202031973.html
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Taxes: What you need to know about the 2023 tax season
 It kicks off today, and there are some changes that consumers 
Taxes: What you need to know about the 2023 tax season
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Fewer Americans will qualify for this overlooked, but valuable tax credit

Sat, January 28, 2023, 5:20 AM GMT+9·3 min read

A valuable tax credit that many taxpayers normally miss won’t be available to as many Americans as last year.

The pandemic enhancements for the Earned Income Tax Credit (EITC) that increased the tax break’s eligibility expired for the 2022 tax year, leaving millions of Americans either unable to claim it or qualifying for a much smaller amount.

The expiration may compound the likelihood that many Americans who are still eligible for the EITC may disregard it this year. Historically, 1 in 5 eligible Americans don’t claim the credit, prompting the Internal Revenue Service to hold an EITC Awareness Day each year — this year on Jan. 27.

“This is an extremely important tax credit that helps millions of hard-working people every year,” IRS Acting Commissioner Doug O’Donnell said in a statement. “But each year, many people miss out on the credit because they don’t know about it or don’t realize they’re eligible.”

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Last year, the American Rescue Act expanded the EITC allowing 18-24 year olds to qualify and imposing no age limit cap. The credit, which helps many low- and moderate-income workers and working families, was made fully refundable. It also tripled the credit amount for workers without qualifying children, benefiting more than 17 million people.

Those changes are now gone. As a result, some taxpayers may receive a smaller refund compared with the previous tax year.

This year, you must be 25-64 years old to qualify for EITC — unlike last year’s pandemic expansion that allowed 18-24 year olds to be eligible. For single filers with no children, the maximum EITC is $560. Last year, the maximum pandemic-era credit was $1,500.

To qualify, you also must have earned income and meet specific adjusted gross income and credit limits for the current, previous, and upcoming tax years.

EITC Income Thresholds
Credit: IRS

Earned income is wages, salary, tips, self-employment, and work from your side hustle or gig — like temporary work, working as a driver for a ride-share or delivery service, or selling merchandise online. For those in the military, nontaxable combat pay is considered income.

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