If your earned income (income from a job) falls below certain levels, you may qualify for a reduction in taxes and possibly a refund. Federal, Maryland and Montgomery County tax programs offer "earned income credits" (EIC).
What is the Earned Income Credit?
It is a special program for low and moderate-income persons who have been employed in the last tax year. The program is administered by the Internal Revenue Service (IRS) and is a major anti-poverty initiative. It can reduce your federal taxes (possibly to zero). You may qualify for extra cash back from the IRS - a refund of more than you paid in taxes. Even if your earnings are so low that you did not pay taxes, you may be able to get a payment.
Am I eligible?
Generally, you may be eligible if you earned income from a job during the tax year. To see what income can be used to qualify, see the IRS website. There are other criteria including:
- your earned income and investment income are below the maximums. See the IRS website for current limits.
- have a valid social security number
- if you are married, you must file jointly
- if you do not have a qualifying child, you must be between 25 and 65 and not be the dependent of another person
For an easy-to-understand guide to help you determine if you are eligible, look at the IRS website. You can find the complete information in IRS publication 596.
How much is the credit?
If you qualify, the amount of the credit depends on your household size. The credit is more valuable for families with more children. To see the current credit amounts, visit the IRS website.
How do I get a Federal Earned Income Credit?
You must file a Form 1040 (or 1040 SR if you are over 65) and attach Schedule EIC. If you are married, you and your spouse must file a joint return to get the EIC. Even if your earned income is so low you are not required to file a tax return, you will need to file a return to get your EIC refund.
If you qualify for the EIC, you may consider using a tax preparer that participates in the IRS Free File program.
Does Maryland offer a state Earned Income Tax Credit?
If you qualify for the federal earned income tax credit also qualify for the Maryland earned income tax credit. The credit is equal to 50% of the federal tax credit.
If you earn less than $57,000 per year, you can get free help preparing your Maryland income tax return through the CASH Campaign.
Montgomery County Working Families Income Supplement
Montgomery County will match a taxpayer's State Refundable EIC dollar for dollar. For example, if the State refunds $100 the County will add an additional $100. The refund is separate from the Maryland state tax refund and will arrive separately. See the Montgomery County website for more details.