2016 Earned Income Credit Income Limits, Maximum Credit Amounts and Tax Law Updates

2016 Earned Income and AGI Limits

Earned income and adjusted gross income (AGI) must each be less than:

Investment Income Limit

Investment income must be $3,400 or less for the year.

Maximum Credit Amounts

The maximum amount of credit for Tax Year 2016 is:

• $6,269 with three or more qualifying children
• $5,572 with two qualifying children
• $3,373 with one qualifying child
• $506 with no qualifying children

For more information on whether a child qualifies you for EITC, see:

• Qualifying Child Rules, or
• Publication 596, Rules If You Have a Qualifying Child.

The American Tax Relief Act of 2012

The American Tax Relief act extended the relief for married taxpayers, the expanded credit for taxpayers with three or more qualifying children and other provisions to December 31, 2017

What is 2016 Earned Income Credit?

Earned income includes all the taxable income and wages you get from working or from certain disability payments.

There are two ways to get earned income:

You work for someone who pays you

or

You own or run a business or farm

Taxable earned income includes:

• Wages, salaries, tips, and other taxable employee pay;
• Union strike benefits;
• Long-term disability benefits received prior to minimum retirement age;
• Net earnings from self-employment if:
  • You own or operate a business or a farm or
  • You are a minister or member of a religious order (see Special Rules page for more information);
  • You are a statutory employee and have income. (See definition of statutory employee on ourHelpful Definitions and Acronyms for EITC page).

Nontaxable Combat Pay election. You can elect to have your nontaxable combat pay included in earned income for EITC. The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. Electing to include nontaxable combat pay in earned income may increase or decrease your EITC. See Publication 3. Armed Forces Tax Guide, for more information.

Examples of Income that are Not Earned Income:

• Pay received for work while an inmate in a penal institution
• Interest and dividends
• Retirement income
• Social security
• Unemployment benefits
• Alimony
• Child support.