The Earned Income Tax Credit May Save You Thousands in Taxes
By Stephanie Breedlove of Breedlove & Associates
As you’re putting the finishing touches on your 2013 taxes, it’s important to make sure you’re taking
advantage of as many tax savings opportunities as you can. Many nannies don’t realize there is a little-
known tax break called the Earned Income Tax Credit (EITC) designed to help hard-working Americans of
modest means. A significant number of nannies qualify for the EITC but don’t take advantage of it simply
because they’re not aware of it. To make sure you’re armed with as much knowledge as possible, here’s
what you need to know:
Who Qualifies for the EITC?
For 2013, qualification is limited to workers with Adjusted Gross Income (AGI) less than:
• $46,227 ($51,567 married filing jointly) with 3 or more qualifying children;
• $43,038 ($48,378 married filing jointly) with 2 qualifying children;
• $37,870 ($43,210 married filing jointly) with 1 qualifying child; or
• $14,340 ($19,680 married filing jointly) with no qualifying children.
Your AGI is listed on line 38 of your personal 1040. Additionally, you must also meet the following tests:
- • You and your spouse must be between the ages of 25 and 64;
- • You, your spouse and your qualifying children must have valid Social Security Numbers;
- • You cannot use the married filing separately filing status;
- • You and your spouse must be a U.S. citizen or resident alien for the entire year;
- • You and your spouse cannot be claimed as a qualifying child by someone else;
- • You cannot claim the foreign earned income exclusion (which relates to wages earned while living abroad)
- • Investment income must be $3,300 or less for the year (investment income includes interest, dividends, capital gains, and royalties).
How Much Is the Tax Credit?
The maximum benefit available to you for 2013 is:
- • $6,044 with 3 or more qualifying children;
- • $5,372 with 2 qualifying children;
- • $3,250 with 1 qualifying child; and
- • $487 with no qualifying children.
Note: Since the Earned Income Tax Credit is a “refundable tax credit,” it is possible to receive a
federal tax refund that is greater than the amount of taxes you paid in during the year.
If you think you will qualify, you should apply for the credit using the EITC Assistant on the IRS website.