Earning

You may be eligible for a tax break worth up to $1,500: Here's how to find out

The EITC has nearly tripled from $540 to up to $1,500 for 17 million workers without children.

Share
Jamie Grill | Getty Images
Key Points
  • The EITC has nearly tripled for 2021 from $540 to up to $1,500 for workers without children.
  • The age limit of who is eligible for the EITC has been expanded to include workers as young as 19.
  • "You can base your Earned Income Tax Credit on your 2019 income," says Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center.

Thanks to the American Rescue Plan, millions of Americans are expected to be eligible for a credit worth up to $1,500 when they file their 2021 taxes.

The Earned Income Tax Credit has nearly tripled from $540 to up to $1,500 for 17 million workers without dependent children.

The EITC is designed to help low to moderate income workers and families get a tax break. If you qualify, you can use the credit to reduce the taxes you owe — and maybe increase your refund. If you have kids, the EITC for 2021 can be as high as $6,728 depending on your tax-filing status, income, and number of children you have.

The difference this year is that the tax break is much bigger for people without kids.

The expansion makes "previously ineligible younger workers ages 19 to 24, who are not half-time or full-time students, and older workers, 65 or older, newly eligible" for the credit, according to a White House statement released Tuesday.

"They've changed who is eligible for the credit," says Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center. "Before 2021, if you didn't have a child, you had to be between the ages of 25 and 64 to get the Earned Income Tax Credit."

Who's eligible for the expanded Earned Income Tax Credit

The expanded EITC only applies to the tax return you file this year for 2021 and it "will mostly benefit low-wage workers," Maag explains. If you're a taxpayer without kids and you earned up to $21,430 from a job or side hustle, or if you're self-employed, you can claim the credit when you file your 2021 tax return.

Compare that with 2019. In order to qualify for the EITC three years ago, you had to make less than $15,570, and if you had no children, the highest credit you could receive was $529.

Another major change could help more people qualify: "If you've earned more in the previous year than you did in 2021, you can base your Earned Income Tax Credit on your 2019 income," Maag explains. This is meant to help Americans who lost work as a result of the Covid-19 pandemic in 2020, because the closer your income is to the top income threshold, the higher the tax credit will be.

The age limits were expanded, so "you can be as young as 19 and also get the credit," Maag says. "If you're a former foster youth or a qualified homeless youth, you can start getting the credit at age 18."

VIDEO2:4702:47
Tax credits vs deductions: Here's the difference

Video by Stephen Parkhurst

How to claim the credit

The EITC will appear on a Form 1040, otherwise known as an individual income tax return. When you file your taxes, services like TurboTax and H&R Block will help you determine if you're eligible for the EITC.

If you meet the income requirements, you can file your federal taxes for free through the IRS Free File Program.

Things might get complicated if you're basing your eligibility on your 2019 income, so it may be helpful to enlist the help of a tax professional, Maag says.

If you can't afford one, "you can also look on the IRS website for a Volunteer Income Tax Assistance site." Maag volunteers at a VITA site and says, "we basically act as H&R Block, but we help you file your taxes for free."

More from Grow: