26 U.S.C. § 32: Earned income

In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the credit percentage of so much of the taxpayer’s earned income for the taxable year as does not exceed the earned income amount. the credit percentage of the earned income amount, over the phaseout percentage of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds the phaseout amount. The credit percentage and the phaseout percentage shall be determined as follows: In the case of an eligible individual with: The credit percentage is: The phaseout percentage is: 1 qualifying child 34 15.98 2 qualifying children 40 21.06 3 or more qualifying children 45 21.06 No qualifying children 7.65 7.65 Subject to subparagraph (B), the earned income amount and the phaseout amount shall be determined as follows: In the case of an eligible individual with: The earned income amount is: The phaseout amount is: 1 qualifying child $6,330 $11,610 2 or more qualifying children $8,890 $11,610 No qualifying children $4,220 $5,280 In the case of a joint return filed by an eligible individual and such individual’s spouse, the phaseout amount determined under subparagraph (A) shall be increased by $5,000. any individual who has a qualifying child for the taxable year, or such individual’s principal place of abode is in the United States for more than one-half of such taxable year, such individual (or, if the individual is married, either the individual or the individual’s spouse) has attained age 25 but not attained age 65 before the close of the taxable year, and such individual is not a dependent for whom a deduction is allowable under section 151 to another taxpayer for any taxable year beginning in the same calendar year as such taxable year. If an individual is the qualifying child of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall not be treated as an eligible individual for any taxable year of such individual beginning in such calendar year. The term “eligible individual” does not include any individual who claims the benefits of section 911 (relating to citizens or residents living abroad) for the taxable year. The term “eligible individual” shall not include any individual who is a nonresident alien individual for any portion of the taxable year unless such individual is treated for such taxable year as a resident of the United States for purposes of this chapter by reason of an election under subsection (g) or (h) of section 6013. such individual’s taxpayer identification number, and if the individual is married, the taxpayer identification number of such individual’s spouse. wages, salaries, tips, and other employee compensation, but only if such amounts are includible in gross income for the taxable year, plus the amount of the taxpayer’s net earnings from self-employment for the taxable year (within the meaning of section 1402(a)), but such net earnings shall be determined with regard to the deduction allowed to the taxpayer by section 164(f). the earned income of an individual shall be computed without regard to any community property laws, no amount received as a pension or annuity shall be taken into account, no amount to which section 871(a) applies (relating to income of nonresident alien individuals not connected with United States business) shall be taken into account, no amount received for services provided by an individual while the individual is an inmate at a penal institution shall be taken into account, no amount described in subparagraph (A) received for service performed in work activities as defined in paragraph (4) or (7) of section 407(d) of the Social Security Act to which the taxpayer is assigned under any State program under part A of title IV of such Act shall be taken into account, but only to the extent such amount is subsidized under such State program, and a taxpayer may elect to treat amounts excluded from gross income by reason of section 112 as earned income. The term “qualifying child” means a qualifying child of the taxpayer (as defined in section 152(c), determined without regard to paragraph (1)(D) thereof and section 152(e)). The term “qualifying child” shall not include an individual who is married as of the close of the taxpayer’s taxable year unless the taxpayer is entitled to a deduction under section 151 for such taxable year with respect to such individual (or would be so entitled but for section 152(e)). For purposes of subparagraph (A), the requirements of section 152(c)(1)(B) shall be met only if the principal place of abode is in the United States. A qualifying child shall not be taken into account under subsection (b) unless the taxpayer includes the name, age, and TIN of the qualifying child on the return of tax for the taxable year. The Secretary may prescribe other methods for providing the information described in clause (i). For purposes of paragraphs (1)(A)(ii)(I) and (3)(C), the principal place of abode of a member of the Armed Forces of the United States shall be treated as in the United States during any period during which such member is stationed outside the United States while serving on extended active duty with the Armed Forces of the United States. For purposes of the preceding sentence, the term “extended active duty” means any period of active duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period. In the case of an individual who is married, this section shall apply only if a joint return is filed for the taxable year under section 6013. Except as provided in subparagraph (B), marital status shall be determined under section 7703(a). is married (as determined under section 7703(a)) and does not file a joint return for the taxable year, resides with a qualifying child of the individual for more than one-half of such taxable year, and during the last 6 months of such taxable year, does not have the same principal place of abode as the individual’s spouse, or has a decree, instrument, or agreement (other than a decree of divorce) described in section 121(d)(3)(C) with respect to the individual’s spouse and is not a member of the same household with the individual’s spouse by the end of the taxable year. Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months. The amount of the credit allowed by this section shall be determined under tables prescribed by the Secretary. for earned income between $0 and the amount of earned income at which the credit is phased out under subsection (b), and for adjusted gross income between the dollar amount at which the phaseout begins under subsection (b) and the amount of adjusted gross income at which the credit is phased out under subsection (b). No credit shall be allowed under subsection (a) for the taxable year if the aggregate amount of disqualified income of the taxpayer for the taxable year exceeds $10,000. interest or dividends to the extent includible in gross income for the taxable year, interest received or accrued during the taxable year which is exempt from tax imposed by this chapter, gross income from rents or royalties not derived in the ordinary course of a trade or business, over the deductions (other than interest) which are clearly and directly allocable to such gross income, plus interest deductions properly allocable to such gross income, the capital gain net income (as defined in section 1222) of the taxpayer for such taxable year, and the aggregate income from all passive activities for the taxable year (determined without regard to any amount included in earned income under subsection (c)(2) or described in a preceding subparagraph), over the aggregate losses from all passive activities for the taxable year (as so determined). such dollar amount, multiplied by in the case of amounts in subsection (b)(2)(A), “calendar year 1995” for “calendar year 2016”, in the case of the $5,000 amount in subsection (b)(2)(B), “calendar year 2008” for “calendar year 2016”, and in the case of the $10,000 amount in subsection (i)(1), “calendar year 2020” for “calendar year 2016”. If any dollar amount in subsection (b)(2)(A) (after being increased under subparagraph (B) thereof), after being increased under paragraph (1), is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10. If the dollar amount in subsection (i)(1), after being increased under paragraph (1), is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50. No credit shall be allowed under this section for any taxable year in the disallowance period. the period of 10 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to fraud, and the period of 2 taxable years after the most recent taxable year for which there was a final determination that the taxpayer’s claim of credit under this section was due to reckless or intentional disregard of rules and regulations (but not due to fraud). In the case of a taxpayer who is denied credit under this section for any taxable year as a result of the deficiency procedures under subchapter B of chapter 63, no credit shall be allowed under this section for any subsequent taxable year unless the taxpayer provides such information as the Secretary may require to demonstrate eligibility for such credit. the United States Housing Act of 1937, title V of the Housing Act of 1949, section 101 of the Housing and Urban Development Act of 1965, sections 221(d)(3), 235, and 236 of the National Housing Act, and the Food and Nutrition Act of 2008, Solely for purposes of subsections (c)(1)(E) and (c)(3)(D), a taxpayer identification number means a social security number issued to an individual by the Social Security Administration (other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act) on or before the due date for filing the return for the taxable year. Subsection (c)(1)(A)(ii)(II) shall be applied by substituting “the applicable minimum age” for “age 25”. except as otherwise provided in this subparagraph, age 19, in the case of a specified student (other than a qualified former foster youth or a qualified homeless youth), age 24, and in the case of a qualified former foster youth or a qualified homeless youth, age 18. For purposes of this paragraph, the term “specified student” means, with respect to any taxable year, an individual who is an eligible student (as defined in section 25A(b)(3)) during at least 5 calendar months during the taxable year. on or after the date that such individual attained age 14, was in foster care provided under the supervision or administration of an entity administering (or eligible to administer) a plan under part B or part E of title IV of the Social Security Act (without regard to whether Federal assistance was provided with respect to such child under such part E), and provides (in such manner as the Secretary may provide) consent for entities which administer a plan under part B or part E of title IV of the Social Security Act to disclose to the Secretary information related to the status of such individual as a qualified former foster youth. For purposes of this paragraph, the term “qualified homeless youth” means, with respect to any taxable year, an individual who certifies, in a manner as provided by the Secretary, that such individual is either an unaccompanied youth who is a homeless child or youth, or is unaccompanied, at risk of homelessness, and self-supporting. Subsection (c)(1)(A)(ii)(II) shall be applied without regard to the phrase “but not attained age 65”. The table contained in subsection (b)(1) shall be applied by substituting “15.3” for “7.65” each place it appears therein. by substituting “$9,820” for “$4,220”, and by substituting “$11,610” for “$5,280”. Subsection (j) shall not apply to any dollar amount specified in this paragraph. Except as provided in paragraph (2), the amendments made by this section [amending this section and section 6213 of this title ] shall apply to taxable years beginning after December 31, 2001 . The amendment made by subsection (g) [amending section 6213 of this title ] shall take effect on January 1, 2004 .” The amendment made by subsection (a) [amending this section] shall take effect as if included in the amendments made by section 451 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 [ Pub. L. 104–193 ]. The amendments made by subsection (b) [amending this section] shall take effect as if included in the amendments made by section 11111 of Revenue Reconciliation Act of 1990 [ Pub. L. 101–508 ].” The amendments made by subsection (a) [amending this section and sections 6213 and 6695 of this title] shall apply to taxable years beginning after December 31, 1996 . The amendments made by subsections (b), (c), and (d) [amending this section] shall apply to taxable years beginning after December 31, 1997 .” Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1995 . In the case of any individual who on or before June 26, 1996 , has in effect an earned income eligibility certificate for the individual’s taxable year beginning in 1996, the amendments made by this section shall apply to taxable years beginning after December 31, 1996 .” Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 1995 . In the case of any individual who on or before June 26, 1996 , has in effect an earned income eligibility certificate for the individual’s taxable year beginning in 1996, the amendments made by this section shall apply to taxable years beginning after December 31, 1996 .” Except as provided in paragraph (2), the amendments made by this section [amending this section and section 6109 of this title ] shall apply to returns for taxable years beginning after December 31, 1994 . returns for taxable years beginning in 1995 with respect to individuals who are born after October 31, 1995 , and returns for taxable years beginning in 1996 with respect to individuals who are born after November 30, 1996 .” such earned income for the taxpayer’s first taxable year beginning in 2019, for such earned income for the taxpayer’s first taxable year beginning in 2021. For purposes of this section, the term ‘earned income’ has the meaning given such term under section 32(c) of the Internal Revenue Code of 1986. For purposes of subsection (a), in the case of a joint return, the earned income of the taxpayer for the first taxable year beginning in 2019 shall be the sum of the earned income of each spouse for such taxable year. For purposes of section 6213 of the Internal Revenue Code of 1986, an incorrect use on a return of earned income pursuant to subsection (a) shall be treated as a mathematical or clerical error. Except as otherwise provided in this subsection, the Internal Revenue Code of 1986 shall be applied without regard to any substitution under subsection (a). The Secretary of the Treasury shall pay to each possession of the United States which has a mirror code tax system amounts equal to the loss (if any) to that possession by reason of the application of the provisions of this section (other than this subsection) with respect to section 32 of the Internal Revenue Code of 1986. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession. The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits (if any) that would have been provided to residents of such possession by reason of the provisions of this section (other than this subsection) with respect to section 32 of the Internal Revenue Code of 1986 if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply unless the respective possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to its residents. For purposes of this section, the term ‘mirror code tax system’ means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States. For purposes of section 1324 of title 31 , United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.” such earned income for the preceding taxable year, for such earned income for the taxpayer’s first taxable year beginning in 2020. For purposes of this section, the term ‘earned income’ has the meaning given such term under section 32(c) of the Internal Revenue Code of 1986. For purposes of subsection (a), in the case of a joint return, the earned income of the taxpayer for the preceding taxable year shall be the sum of the earned income of each spouse for such preceding taxable year. For purposes of section 6213 of the Internal Revenue Code of 1986, an incorrect use on a return of earned income pursuant to subsection (a) shall be treated as a mathematical or clerical error. Except as otherwise provided in this section, the Internal Revenue Code of 1986 shall be applied without regard to any substitution under subsection (a).” The costs (in time and money) incurred by the participants in the program. The administrative costs incurred by the Internal Revenue Service in operating the program. ineligibility for the credit; and failure to complete the requirements for certification. otherwise eligible for the credit; and otherwise ineligible for the credit. did not respond to the request for certification; and responded to such request but otherwise failed to complete the requirements for certification. for which individuals described in paragraph (5)(A) did not respond to requests for certification; and for which individuals described in paragraph (5)(B) had difficulty in completing the requirements for certification. failure to complete the requirements for certification; and ineligibility for the credit. The impact of the program on non-English speaking participants. The impact of the program on homeless and other highly transient individuals. Not later than July 30, 2004 , the Commissioner of the Internal Revenue Service shall submit to Congress a preliminary report on the study conducted under subsection (a). Not later than June 30, 2005 , the Commissioner of the Internal Revenue Service shall submit to Congress a final report detailing the findings of the study conducted under subsection (a).”