Social Security Recipients and the Earned Income Tax Credit

The earned income credit is often confusing to many taxpayers. There are many qualification requirements, and the credit changes depending on the number of eligible children a taxpayer has. Recipients of social security benefits may be eligible to receive the earned income credit in certain circumstances. All taxpayers with lower incomes should calculate whether they are able to claim the credit.

The first requirement for claiming the earned income credit is an income ceiling. If filing jointly, you can have a maximum income of $48,279 if you have three or more qualifying children, $45,295 if you have two, $40,463 if you have one, and $18,440 if you do not have any qualifying children. The credit disappears over these income limits. You can only claim the credit if you have earned income, which means income from employment or self-employment. You can also elect to include non-taxable combat pay in your calculations. Long-term disability benefits count as earned income if received before retirement. Another requirement is that investment income, such as from interest or dividends, must be lower than $3,100 in the year.

Social security benefits do not count as earned income for the earned income credit on their own. If that is the only income you received during the year, you are not eligible for the credit. In the year that you begin to receive social security benefits, you may also have income from a job or from self-employment prior to receiving benefits. This income can be used for an earned income credit claim. Pension income from private or other government units is also not eligible for the earned income credit.

The Social Security Administration pays benefits to those under retirement age who are disabled and unable to do their former work or adjust to new work. This means that during the time that social security disability benefits are received, no employment or self-employment income will be received. This results in an ineligibility for the earned income credit. In the year that social security disability benefits are first received, or in the year they are no longer received, a taxpayer may also have employment income. This income is eligible for the earned income credit.

The earned income credit is usually claimed on the IRS form called Schedule EIC, and attached to the taxpayer's 1040 return. If you do not want to figure the credit out yourself, you can have the IRS do it for you. To have the IRS calculate your earned income credit, simply write "EIC" next to the box where the amount is calculated on the 1040. In certain circumstances, you may also be able to have advance earned income credit payments made to you during the year rather than waiting for the entire credit after filing your return.