Earned Income
A taxpayer must, of course, have earned income to qualify for the earned income credit. Earned income for purposes of the EIC includes only taxable earned income (items included in gross income). Non-taxable earned income items are not included as earned income for the EIC.
Note: If a taxpayer is married, filing as head of household (under the special rule for divorced or separated parents), and lives in a state that has community property laws, earned income for the credit does not include any amount earned by the taxpayer’s spouse that is treated as belonging to the taxpayer under community property laws. That amount is not earned income for the credit, even though a taxpayer must include it in gross income on his/her tax return.
The table indicates various types of earned and unearned income for purposes of the credit:
Awareness
The IRS estimates that up to 1.5 million people who are receiving long-term disability retirement benefits are missing out on claiming the EIC. For those that qualify and missed the credit in prior years, they can still amend their past three years of tax returns if the amendment is filed within three years of the original (generally April) due date for the return.