The American Rescue Plan is great news for lower-income taxpayers.
Expanded for 2021 – More Younger and Older Will Qualify
More workers without qualifying children will be able to claim the earned income tax credit (EITC). The “childless EITC” amounts will be higher, too. Plus, there are other changes that will help the bottom line for lower-income Americans as well.
2020
The maximum EITC was $538 to $6,660, depending on your income and how many children you have. However, there are income limits for the credit. For example, if you have no children, both your 2020 earned income and AGI had to be less than $15,820 for singles and $21,710 for joint filers. If you have three or more children and are married, though, your 2020 earned income and AGI could be as high as $56,844. If you don’t have a qualifying child, you had to be between 25 and 64 years old at the end of the tax year to claim the EITC.
2021
The American Rescue Plan expanded the 2021 EITC for childless workers in a few ways.
- Lowers the minimum age from 25 to 19 (except for certain full-time students).
- Eliminates the maximum age limit (65) – so older people without qualifying children can claim the 2021 credit, too.
- The maximum credit available for childless workers is also increased from $543 to $1,502 for the 2021 tax year.
- Expanded eligibility rules for former foster youth and homeless youth.
As with the 2020 EITC, you can also use your 2019 earned income instead of your 2021 income if that will boost your credit amount.
The enhancements described above are only for the 2021 tax year. However, there are also a few permanent EITC changes that take effect in 2021. For instance, workers who otherwise wouldn’t be able to claim the credit because their children can’t satisfy the identification requirements can now claim the childless EITC. Certain married but separated couples can now claim the EITC on separate tax returns, too. The limit on a worker’s investment income is also increased from $3,650 (for 2020) to $10,000 (adjusted for inflation after 2021).
See IRS Website for more information.
