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2009 EITC ARRA Changes and Inflation Adjustments 

The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. ARRA also increases the beginning point of the phase-out range for the credit for all married couples filing a joint return, regardless of the number of children. These changes apply to 2009 and 2010 tax returns.

The credit begins to phase out at $21,420 for married taxpayers filing a joint return with children and completely phases out at $40,463 for one child, $45,295 for two children and $48,279 for three or more children. For married taxpayers filing a joint return with no children, the credit begins to phase out at $12,470 and completely phases out at $18,440.

 Check here for the 2009 Tax Year income limits and maximum credit amounts.

Changes to the Uniform Definition of a Child

Public Law 110-351,"Fostering Connections to Success and Increasing Adoptions Act of 2008" was enacted October 7, 2008.

This legislation provides clarification of the uniform definition of a child and other provisions.  Sec. 501 clarifies the definition of "qualifying child" by requiring the child must:

• Be younger than the taxpayer claiming that child
• Not have filed a joint return other than for a claim of refund

Please note: Sec. 501 allows a taxpayer other than the parents of a qualifying child to claim such individual, but only if the adjusted gross income of the taxpayer is higher than the highest adjusted gross income of any parent of the individual.

These changes are in effect for tax years beginning after December 31, 2008.

07/08/2009