Earned Income Tax Credit: Rule 6

One important requirement that must be met if you wish to claim the relates to your investment income. Any income made from investments has to be $3,400 or less, as taxpayers with more than this limit are not eligible to claim the .

Investment income is listed on a Form 1040EZ on line 2 and includes tax-exempt interest on the investments. On a Form 1040A, investment income is recorded on line 8a for taxable interest, 8b for tax-exempt interest, 9a for ordinary dividends, and line 10 for capital gains distributions. A regular Form 1040 uses Worksheet 1 to calculate the total of investment income.

You can chose to report taxable income from interest for yourself or your children, calculating the total amount using Worksheet 2. This worksheet will help you determine the amount of investment interest you need to report on Worksheet 1, which will determine if you are eligible for the Earned Income Tax Credit.