Help NACCRRA win a $250K grant from Pepsi that will provide new parents with the tools they need to get their infants off to a safe and healthy start. Join our Facebook Page

Tax Time Can Pay For Parents Earning Low Or Moderate Incomes

January 19, 2004

Parents earning low or moderate incomes are under extreme pressure to meet the costs of raising children and overall household expenses. It's important for parents and guardians of children to be aware of tax advantages that can be of great help. Here are some tips from the Center on Budget and Policy Priorities.

Low and moderate-income workers raising children are likely to qualify for a valuable federal tax benefit: the Earned Income Credit (EIC). But workers must file a federal income tax return and specifically claim the EIC. (Sixteen states and the District of Columbia provide a state EIC.)

What is the EIC worth? The EIC is worth up to $4,204 for parents who worked in 2003 - about $2,000 is the average. For example, the EIC for a single parent raising two children in 2003 who earned $19,000 is over $3,000. Even workers who did not earn enough to owe income taxes can receive the EIC.

Which parents are eligible?

Workers raising children in their homes for more than six months in 2003 may qualify, depending on their income. (Children born after June 2003 are considered to have lived with their parents the entire year.)

A worker raising one child whose income was less than $29,666* in 2003 may receive an EIC up to $2,547.

A worker raising two more children whose income was less than $33,692* in 2003 may receive an EIC up to $4,204.

*Married workers must file a joint return to claim the EIC and count the incomes of both spouses. The income limit for married workers is $1,000 higher than the amounts above.

Qualifying children for the EIC. Children often are raised by relatives or other caretakers rather than their parents. Such individuals may also qualify for the EIC. The following children may be claimed for the EIC:

How do you claim the EIC? File federal tax form 1040A or 1040. Follow the instructions to figure the amount of the EIC and attach a completed Schedule EIC.

Workers and children must each have a valid Social Security number.

Need Help? Get Free Assistance With Your Tax Return

IRS staff can answer your questions toll-free 24 hours a day at 1-800-829-1040. Also see the IRS website at www.irs.gov/eitc.

In many communities, the Volunteer Income Tax Assistance (VITA) program offers free assistance preparing returns, under IRS guidelines, to workers earning below the EIC income limits. Many VITA sites offer electronic filing of returns for faster refunds. VITA sites are open between late January and mid-April. To find the sites near you, call the IRS toll-free number above. The operators who answer tax questions have lists of VITA sites.

Extra Refunds for Parents!

Many parents may also qualify for the Child Tax Credit, worth up to $1,000 for each child under age 17 claimed as a dependent. See your IRS tax form instructions.

For more information on tax credits, please contact the Center on Budget and Policy Priorities.

« Previous | All Articles | Next »