Tax Credits and Tools

There are various tax credits that can help you save money. Here we will introduce 3 of them:

1. The Child Tax Credit (CTC)
2. The Credit for the Elderly or Disabled
3. The Earned Income Tax Credit (EITC) and Missouri Working Family Credit

To get any of these tax credits, you must file your taxes!

Child Tax Credit (CTC)

The Child Tax Credit (CTC) is available to parents with children under age 17. The CTC gives these parents up to a $2,000 tax credit for each child in the family under 17. Eligible families must be working and earning at least $2,500 a year.

Note that if you're on Supplemental Security Income (SSI) benefits and get money from a CTC, you should spend it within 12 months. After 12 months, Social Security will count that money toward SSI's resource limit.

Credit for the Elderly or Disabled

If you or your spouse is a U.S. citizen who got taxable disability income and was permanently and totally disabled during this tax year, you may be eligible for the Credit for the Elderly or the Disabled.

Earned Income Tax Credit (EITC) and Missouri Working Family Credit

The Earned Income Tax Credit (EITC) is designed to help people with low income by lowering the amount of federal income tax they owe. And the Missouri Working Family Credit lowers the amount of state income tax they owe. Even if you don’t earn enough money to owe federal and state income taxes, you may be able to get these credits. Here we’ll explain the EITC in detail, because many people who qualify for it don’t get it, because they don’t know they could.

Eligibility

To qualify, you must have income from employment, self-employment, or employer-paid disability benefits that is below certain limits and you must file your federal taxes.

The amount you get from your EITC depends on your Adjusted Gross Income (AGI), whether you are married, and the number of children you have. For 2024 (filing taxes by April 2025), the EITC ranges from $2 to $7,830.

The Missouri Working Family Credit is 10% of the Federal EITC, or $0 to $783. For example, if your federal EITC is $4,000, your Working Family Credit is $400.

Earned Income

To qualify for an EITC, you must have earned income. This can include your wages, salaries, tips, net earnings from self-employment, or any other form of taxable pay. You can also elect to include nontaxable combat pay as earned income.

The EITC program considers employer-paid disability payments that you get before retirement as earned income, but benefits payments from a policy you paid the premiums for or that you got after retirement are not considered earned income.

Other things that do not qualify as earned income under the EITC include:

• Interest and dividends
• Social Security and railroad retirement benefits
• Pensions and annuities
• Alimony and child support
• Workers’ compensation benefits
• Unemployment compensation
• Welfare benefits
• Veterans benefits

If you are married and filing jointly, at least one spouse must have earned income to be eligible for an EITC.

Adjusted Gross Income

In addition to the earned income requirement, you must have an adjusted gross income below certain levels to qualify for an EITC.

Your adjusted gross income includes all earned income before deductions for taxes, health care or other expenses, minus certain business, education-related, and other expenses. While filling out your annual tax return (IRS Form 1040), you will be asked a series of questions that will let you figure out what your adjusted gross income is.

Qualifying Children

For a child to be considered a “qualifying child” under an EITC, several requirements must be met:

• Relationship: If you are claiming one or more children, they must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these (for example, your grandchild, niece, or nephew).
• Residence: The child must live at the same residence as you for more than half the year and have a valid Social Security number.
• Age: At the end of the tax year, the child must be under 19. Or, if going to school full-time, the child must be under 24. The only exception is for people who are permanently and totally disabled. If your child is permanently and totally disabled, there is no age requirement.

According to the IRS, a person is considered permanently and totally disabled if:

• Their condition is expected to last continuously for at least 12 months (or 1 year) or is expected to result in death, and
• They cannot perform any Substantial Gainful Activity (SGA) (they are unable to earn more than $1,550 per month ($2,590 if they are blind).

Qualifying children can only be used by one family member to claim an EITC.

How to Get an EITC

If you qualify, you will claim your EITC when you file your federal tax return, IRS Form 1040. If you have a qualifying child, be sure to attach a Schedule EIC.

To calculate the value of your EITC, you can use the Earned Income Credit Worksheet in your 1040 instruction booklet. Or you can ask the IRS to calculate it for you by noting an “EIC” on the Earned Income Credit line on your tax return.

To figure out whether or not you are eligible for an EITC, and to see what the value might be, use the IRS EITC Assistant.

To claim the Missouri Working Family Credit, you must qualify for the federal EITC on your federal tax return, and you must file a state tax return (Form MO-1040) with Form MO-WFTC and a copy of your federal taxes attached.

Tax Preparation Tips for Claiming the EITC

Keep all your W-2 forms and keep a record of who you have worked for during the year. This will make things simpler when it comes time to file your taxes.

Be sure to file your taxes, even if your income is lower than the amount at which you are legally required to file. You might be eligible for an EITC or some other tax credit that you can’t get without filing. Many families with children who qualify for an EITC may also be eligible for a Child Tax Credit (CTC).

EITC Interaction with Other Benefits

Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI)

You must have some form of earned income to qualify for an EITC. Social Security benefits do not count as earned income under the program. You can, however, be on Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) benefits and claim an EITC, as long as you have some form of earned income.

If you're on SSI benefits, you should spend any money you get from an EITC within 12 months. If you save the money longer than that, Social Security will count that money toward SSI's resource limit, unless you save the money in an Individual Development Account (IDA) or Plan to Achieve Self-Support (PASS).

Individual Development Accounts (IDAs)

Money from an EITC can be put into an IDA. This lets you get matching funds from the IDA program sponsor.

Plans to Achieve Self-Support (PASS)

Money from an EITC can be set aside in a PASS. This will let you reach your employment goals more quickly, by saving money without affecting the way your income is counted.

Long-Term Disability Insurance

Employer-paid Long-Term Disability (LTD) Insurance benefits that you got before retirement count as earned income under an EITC and can therefore be used to qualify for the program. Disability insurance benefits which you pay the premiums for or that you get after retirement are not considered earned income and can’t be used to qualify for an EITC.