There have been a few changes to the Earned Income Tax Credit (EITC) for 2011 and years beyond. Some of these changes are pretty significant, others are more of the common variety.
No More Advance Payments
In the past, if a taxpayer was likely to be eligible to receive the EITC on filing his or her return, the law allowed the taxpayer to apply for and receive advance payment of a portion of the credit. This is because the credit is refundable – even if you don’t owe any tax on your tax return, you’ll get something back with the EITC.
With the passage of the Education Jobs and Medicaid Assistance Act of 2010 signed into law August 10, 2010, the Advance payment of EITC was repealed, effective after December 31, 2010.
Third-Child EITC
The American Recovery and Reinvestment Act (ARRA) increased the EITC by 5% for families with three or more children. The original law provides for EITC equal to 40% of the family’s first $12,570 when there are two or more children, and ARRA provided this additional credit for a third child (or more). This provision was set to expire at the end of 2010, but the 2010 Tax Act extended the provision through the end of 2012.
Annual Limits
For 2011, the maximum EITC that can be claimed is increased to $5,751 from the 2010 level of $5,666. In addition, the maximum income limit for EITC is increased to $49,078, up from $48,362 for 2010. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more children.
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Sterling Raskie, MSFS, CFP®, ChFC®
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