2022 Earned Income Credit
The world has been rocked by the COVID-19 pandemic, and this is especially true for individuals who are low- and moderate-income workers. Fortunately, these people may be able to receive the earned income credit, which is a refundable credit that will help reduce the taxpayer’s total tax amount.
Certain lower-income workers are allowed to receive this credit, which is computed by applying a credit percentage to so much of the taxpayer’s earned income.
Earned income, for purposes of this credit, includes self-employment income, wages, salaries, tips and other employee compensation that is included in gross income. There are several items that are not considered earned income, but the most common are interest / dividends, unemployment compensation, pensions / annuities, Social Security income, and alimony / child support.
The credit is phased out based on adjusted gross income amounts, and the number of qualifying children* claimed by the taxpayer. For 2022, to claim the earned income credit the maximum adjusted gross income for a single taxpayer with no children is $16,480.
For 2022, here are the maximum credits allowed:
- No qualifying children = $560
- One qualifying child = $3,733
- Two qualifying children = $6,164
- Three or more qualifying children = $6,935
For 2022, individuals cannot claim the earned income credit if their disqualified income exceeds $10,300. They also cannot claim the credit if they have no earned income.
We understand that the complexity of topics like this can feel overwhelming! Please talk with your tax professional if you ever have any questions about your tax situation.
* Generally, a qualifying child is considered a child related to the taxpayer who lived with the taxpayer for at least six months out of the calendar year. The age limit for a qualifying child is 16 years old, but there are specific nuances involved so it’s best practice to confirm your situation with your professional tax adviser.
** This article is not a complete listing of all the details related to this business / accounting topic and you should contact your CPA for a more detailed discussion regarding these items and how they may apply to your specific situation.
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