Chapter Listing

Tax Credit Programs

Tax Credits for Low-Income Households

Summary

EARNED INCOME TAX CREDIT

The EITC is a refundable federal tax credit for working people with low and moderate incomes. Residents of New York State and New York City may also claim the New York State and New York City earned income credits, each worth a percentage of the allowable federal credit. To qualify taxpayers must meet certain income requirements and is available to households with children and without children, although households with children have a higher credit amount.

NON-CUSTODIAL PARENT EARNED INCOME CREDIT

The Non-Custodial Parent Earned Income Credit (NCP EIC) is a New York State tax credit that supports low-income working non-custodial parents by supplementing their earnings. To qualify, the non-custodial parent must be at least 18 years old, be a resident of NYS, and have not claimed the NYS earned income credit (EIC). In addition, the non-custodial parent must have a child support order in effect for a child (or children) under 18 years old.

Earned Income Tax Credit (EITC)

DESCRIPTION OF THE EARNED INCOME TAX CREDIT

The federal Earned Income Tax Credit (EITC) is a refundable tax credit intended to offset living expenses and Social Security taxes for low-income working families and individuals, including workers whose earnings are too small to have paid taxes.

The EITC will either reduce the amount of tax owed or provide a refund for those who do not owe any tax or have a portion of credit left after their tax liability has been met.

Federal Earned Income Credit

The amount of the credit varies, depending on the level of adjusted income. The maximum amounts are:

  • Eligible workers with three or more qualifying children can receive an annual federal credit of up to $6,935;
  • Eligible workers with two qualifying children can receive an annual federal credit of up to $6,164;
  • Eligible workers with one qualifying child can receive an annual federal credit of up $3,733;
  • Eligible workers with no qualifying children can receive an annual federal credit of up to $560.

New York State Earned Income Credit

For eligible individuals, the federal EITC will be supplemented by the NYS earned income credit. The NYS earned income credit is equal to 30% of the allowable federal earned income credit reduced by the amount of any household credit.

  • Eligible workers with three or more qualifying children will receive an additional state supplement of up to $2,081;
  • Eligible workers with two or more qualifying children will receive an additional state supplement of up to $1,849;
  • Eligible workers with one qualifying child will receive an additional state supplement of up to $1,120;
  • Eligible workers without a qualifying child will receive an additional state supplement of up to $168.

New York City Earned Income Credit

For eligible individuals, the federal and State earned income credits will be supplemented by the NYC earned income credit. Beginning in 2022, the New York City EIC will range from 10% to 30% of the federal EIC based on a taxpayer’s New York adjusted gross income:

  • Eligible workers with three or more qualifying children will receive an additional state supplement of up to $2,081;
  • Eligible workers with two qualifying children will receive an additional state supplement of up to $1,849;
  • Eligible workers with one qualifying child will receive an additional state supplement of up to $1,120;
  • Eligible workers without a qualifying child will receive an additional state supplement of up to $168.

QUALIFYING FOR THE EARNED INCOME TAX CREDIT

Workers with a Qualifying Child

Definition of a Qualifying Child

  • Relationship: A qualifying child must be the worker’s natural child, adopted child, stepchild, or a descendent of any of them (for example a grandchild), brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant (niece or nephew) of any of them. The child may also be a foster child who was placed with the worker by an authorized placement agency or by judgment, decree or other order of any court of competent jurisdiction.
  • Age: The child must be under the age of 19 at the end of the year or under the age of 24 and enrolled as a full-time student during any 5 months during the calendar year.
    • Age is disregarded if the child is permanently and totally disabled at any time during the tax year.
    • Disabled is defined as being unable to engage in any substantial gainful activity because of a physical or mental condition. The condition must have lasted or be expected to last for 12 months or more or ending in death.
    • The child must be an SSI recipient, or have documents from the child’s doctor, other healthcare provider, or any social service program or agency verifying that the child is permanently and totally disabled.

Additional details can be found here, https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/qualifying-child-rules.

Parents Not Filing Jointly

When a child meets the conditions of a qualifying child of more than one person, the two people decide who will claim the credit. If the individuals cannot agree, the following tiebreaker rules apply:

  • If only one of the individuals is the child’s parent, only the parent can treat the child as a qualifying child;
  • If both individuals are the child’s parent, and they do not file a joint return, only the parent with whom the child lived the longest during the year can treat the child as a qualifying child. If the child lived with each parent for the same amount of time during the year, only the parent with the highest adjusted gross income can treat the child as a qualifying child;
  • If neither is the child’s parent, only the person with the highest adjusted gross income can treat the child as a qualifying child.

Workers Without a Qualifying Child

Workers without a qualifying child in the household, must be between the ages of 25 and 65 before the end of the tax year.

There are special EITC rules for members of the military, members of the clergy and those receiving disability benefits which can be found https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/special-eitc-rules.

Citizenship/Immigration Requirements

To claim both the federal, state and city EITC, immigrant workers, their spouses and qualifying children, must each have a valid Social Security number that permits them to work legally in the United States.

Individual Taxpayer Identification Numbers (ITIN) issued by the IRS to non-citizens, and non-work Social Security numbers issued to applicants or recipients of federally funded benefits programs cannot be used to claim the credit.

Applicants who are nonresident immigrants for any part of the year, cannot claim the credit unless married to a U.S. citizen or resident immigrant and must file a joint return with the spouse and choose to be treated as a resident immigrant for that year.

Residency

To claim the federal, state and city EITC, filers must meet the following residency requirements.

  • With A Qualifying Child

    Both the worker and the qualifying child(ren) must live in the same residence in the U.S. for more than half the year. The residency test will still be met even if the applicant or the qualifying child is away from home on a temporary absence due to a special circumstance, such as illness, attending school, business, vacation, or military service.
  • Without A Qualifying Child

    The worker’s main residence must be in the U.S. for more than half the year. Claimants must be residents of New York State to
    receive a full refund. If they live in the state more than half of the year, but not all, they receive a partial refund.

Assets/Resources

There are no assets/resource requirements for the federal, state or city EITC.

Income

There must be earnings to qualify for the EITC. Someone in the filing household must have worked and have earnings during at least a part of the year.

Earned income includes wages, salaries, tips, and net earnings from self-employment. In addition, if the household has income from investments, dividends, tax-exempt interest, and net income from rents and royalties that income must be less than $10,000 in the tax year to qualify.

The maximum amount of adjusted gross income for tax year 2022 cannot exceed the following amounts:

  • For those with no qualifying children: $16,480 ($22,610 if married filing jointly);
  • For those with one qualifying child: $43,492 ($49,622 if married filing jointly);
  • For those with two qualifying children: $49,399 ($55,529 if married filing jointly);
  • For those with three or more qualifying children: $53,057 ($59,187 if married filing jointly).

CLAIMING THE EARNED INCOME TAX CREDIT

Federal Earned Income Credit

With or with a qualifying child can claim the credit by completing the 1040 form, https://www.irs.gov/pub/irs-pdf/f1040.pdf.

Instructions can be found at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.

NYS/NYC Earned Income Credit

To claim NYS/NYC credit, workers should file for the federal EIC, as well as the NYS form IT-215, Claim for Earned Income Credit available at https://www.tax.ny.gov/pdf/current_forms/it/it215_fill_in.pdf or by calling 518-457-5431.

Instructions can be found at https://www.tax.ny.gov/pdf/current_forms/it/it215i.pdf.

See below, Additional Resources, for free tax preparation information.

Non-Custodial Parent Earned Income Credit (NCP EIC)

DESCRIPTION OF THE NON-CUSTODIAL PARENT EARNED INCOME CREDIT

The Non-Custodial Parent Earned Income Credit (NCP EIC) is a New York State tax credit that supports low-income working non-custodial parents by supplementing their earnings.

The amount of the credit is the greater of 20% of the federal earned income credit the non-custodial parent (NCP) could have claimed if the child met the qualifying child definition, or 2.5 times the federal earned income credit that the NCP could have claimed if s/he met the eligibility requirements but had no qualifying children. If the credit exceeds the tax liability, a refund will be issued.

To learn more and to calculate the amount of the tax credit amount, go to https://www.tax.ny.gov/pit/credits/nceic.htm.

QUALIFYING FOR THE NON-CUSTODIAL PARENT EARNED INCOME CREDIT

To qualify for the NCP, the individual;

  • Did not claim the New York State earned income credit (EIC),
  • Is a full-year New York State resident,
  • Is at least 18 years of age,
  • Has adjusted gross income under $42,158,
  • Is a non-custodial parent of a child (or children) under 18 years old,
  • Has a child support order in effect for at least one-half of the tax year requiring child support payments payable through a Support Collection Unit, and
  • Has paid 100% of the current amount of child support due for any tax year in which the NCP EIC is claimed.

CLAIMING THE NON-CUSTODIAL PARENT EARNED INCOME CREDIT

To claim the NCP EIC, the individual must file a Form IT-209: Claim for Noncustodial Parent New York State Earned Income Credit along with the Form IT-215, see https://www.tax.ny.gov/pdf/current_forms/it/it209_fill_in.pdf.

Instructions can be found at https://www.tax.ny.gov/pdf/current_forms/it/it209i.pdf.

See below, Additional Resources, for free tax preparation information.

Note 1: New York State will not allow a claim for the NCP EIC unless the Tax Department has received verification of eligibility from the Office of Temporary and Disability Assistance (OTDA), Department of Child Support Enforcement.

The eligibility verification requires no action on the applicant’s part; the Tax Department receives this information automatically.

Note 2: Eligible workers cannot file both the NYS EITC and the Noncustodial Parent EIC. Workers should choose the credit that offers the greater benefit.
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