Form 1040

27a — Earned Income Credit Updated for tax year 2025

What this line means

The Earned Income Credit (EIC) — a refundable tax credit for low-to-moderate income workers. “Refundable” means it pays you even if you owe zero tax. The credit amount depends on your earned income, filing status, and number of qualifying children. For 2025, the maximum EIC ranges from $649 (no children) to $8,046 (three or more children). This is one of the largest anti-poverty programs in the federal tax code. Filers with investment income (interest, dividends, capital gains) exceeding $11,950 are ineligible regardless of earned income.

Does this apply to you?

  • You have earned income (wages, salary, self-employment) and your AGI is below the EIC threshold for your filing status and number of children
  • You are a single filer with no children earning less than approximately $19,104
  • You are married filing jointly with three children earning less than approximately $68,675
  • You are age 25 or older (or any age with a qualifying child) with earned income and investment income of $11,950 or less

Easy to overlook

Millions of eligible filers do not claim the EIC The IRS estimates that roughly 20% of eligible taxpayers fail to claim the Earned Income Credit every year — leaving billions of dollars unclaimed. Common reasons include not knowing the credit exists, assuming they earn too much, or not filing a return at all because their income was below the filing threshold. 1 [SOURCE: SOI data — billions in unclaimed EIC annually]

Self-employment income counts as earned income for EIC Freelancers, gig workers, and side-hustle earners with net self-employment income qualify for the EIC based on that income. Many self-employed filers focus on Schedule C and self-employment tax but never check whether their income level qualifies them for the EIC. A rideshare driver or freelance designer earning $25,000 with two children could receive over $6,000 in EIC. 2 [SOURCE: IRS Publication 596 — Earned Income Credit]

Watch out for this

Filing married filing separately. The EIC is completely unavailable if you file married filing separately. Couples who file separately for other reasons (such as income-driven student loan repayment plans) lose the entire EIC. Before choosing MFS, calculate whether the EIC you forfeit exceeds the benefit of filing separately.

  • Line 1z — Form 1040 — Total wages; one component of earned income for EIC calculation
  • Schedule EIC — Form 1040 — Required to claim EIC if you have qualifying children
  • Line 1i — Form 1040 — Nontaxable combat pay election; can be included as earned income for EIC

Footnotes

  1. IRS Statistics of Income, Earned Income Tax Credit Participation. https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns ↩

  2. IRS Publication 596, Earned Income Credit. https://www.irs.gov/pub/irs-pdf/p596.pdf ↩

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