{"id":1096,"date":"2017-04-05T12:48:08","date_gmt":"2017-04-05T16:48:08","guid":{"rendered":"https:\/\/www.etax.com\/blog\/?p=1096"},"modified":"2019-07-10T13:26:47","modified_gmt":"2019-07-10T17:26:47","slug":"unemployment-earned-income-credit","status":"publish","type":"post","link":"https:\/\/www.etax.com\/blog\/2017\/04\/05\/unemployment-earned-income-credit\/","title":{"rendered":"Unemployment and the Earned Income Credit"},"content":{"rendered":"

Even if you received unemployment compensation during the year, you may still be able to claim the Earned Income Credit<\/a>. However, you\u2019ll need to meet a few requirements first.<\/p>\n

The EIC, as its name suggests, require you to have \u201cearnings\u201d, sourced from the act of providing services in exchange for compensation \u2013 for example: employment. While you may still be able to claim the credit even if you collect unemployment benefits, you must meet all the requirements of the credit as well. In some cases, the EIC can generate a refund, in situations where your taxes are reduced to zero.<\/p>\n

Unemployment<\/u><\/strong><\/h4>\n

Earned income is money you receive from employment and self-employment activities, per the IRS definition. Unemployment compensation provided by the state is specifically excluded from the definition of earned income. Although, if you worked at all during the year in which you received the unemployment, you may meet the eligibility requirements needed to satisfy the EIC. So, if you worked from January to May 2016, and began receiving unemployment checks in June, you are still considered to have some earned income.<\/p>\n

AGI Limits<\/u><\/strong><\/h4>\n

The Earned Income Credit<\/a> is available to taxpayers with an adjusted gross income (AGI)<\/a> that is less than the applicable maximum for the year. This threshold is dependent on your filing status and the number of qualifying dependents you claim. Each qualifying child increases the AGI limit, as well as filing a return as a married taxpayer over a single filer. You can\u2019t claim the credit if you file using the status married, filing separately.<\/p>\n

Your AGI is calculated by deducting the appropriate \u201cAdjustments to income\u201d as per IRS regulations from the amount of your income subject to taxation. The credit requires that your earned income amount and your AGI BOTH be below the limit.<\/p>\n

NOTE: There\u2019s a chance that while your earned income amount may be below the required threshold, your AGI, due to the addition of unemployment compensation, may come in above the limit. In these situations, you are not eligible to claim the credit.<\/p>\n

Residency Status<\/u><\/strong><\/h4>\n

The EIC requires that neither you nor your spouse, if you file a joint return, be a nonresident alien for any period during the tax year.<\/p>\n

If you aren\u2019t a US Citizen, you\u2019ll need to have legal documentation allowing residency in the country, or you\u2019ll have to meet the IRS rules for substantial presence, which requires you to be physically present in the country for a set number of days. Additionally, you\u2019ll need a Social Security card<\/u> without the statement \u201cnot valid for employment\u201d if you want to claim the EIC.<\/p>\n

U.S. citizens living abroad can\u2019t claim the foreign earned income exclusion on form 2555 or 2555-EZ, otherwise you\u2019ll be unable to claim the tax credit.<\/p>\n

Investment Income<\/u><\/strong><\/h4>\n

To claim the EIC, you can\u2019t have investment income that exceeds $3,150. Investment income doesn\u2019t include money earned through work or unemployment compensation, though capital gains<\/a> from stock, bonds, bank account interest and dividends are included.<\/p>\n","protected":false},"excerpt":{"rendered":"

Even if you received unemployment compensation during the year, you may still be able to claim the Earned Income Credit. However, you\u2019ll need to meet a few requirements first. The EIC, as its name suggests, require you to have \u201cearnings\u201d, sourced from the act of providing services in exchange for compensation \u2013 for example: employment. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[59,183,170,557],"class_list":["post-1096","post","type-post","status-publish","format-standard","hentry","category-credits-2","tag-earned-income-credit","tag-investment-income","tag-unemployment","tag-unemployment-compensation"],"yoast_head":"\nUnemployment and the Earned Income Credit - eTax.com\u00ae Blog<\/title>\n<meta name=\"description\" content=\"Even if you received unemployment compensation during the year, you may still be able to claim the Earned Income Credit. 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