 Here we are in our example Form 1040 populated with LASERT tax software. You don't need tax software to follow along, but it's a great tool to run scenarios with. You can also get access to the Form 1040 related forms and schedules at the IRS website, irs.gov, irs.gov. Starting point, we have the single filer Mr. Anderson living in Beverly Hills 90210 100,000 W2 income, which is way over the threshold to get the earned income tax credit, but that's just where we have been starting. So we'll start there. And then we've got the 12,950 standard deduction being taken. That gets us to the 87,050 taxable income page number two, then 14774 is the tax being calculated. We're imagining 15,000 withheld for a refund of the 226. Now we want to focus in on the earned income credit, particularly related to people that have no children. Now note, when you think about the earned income tax credit, you have to have some income in order to get it, but then it caps out at some income level and goes back down. And you can think about that threshold with regards to these three or four categories, no children, one child, two child, three or more children, and think about what that curve will look like. So for example, we're going to focus here on zero children, which means the maximum credit at that level is only 560 as opposed to three or more children where it's 6,935 and the maximum AGI is 16,480. But that max really is when the credit goes below to zero. What we want to know is where is the max AGI that I can get to in order to get the full biggest credit of the 560 if you're married filing joint, the max amount is 22610. So let's see if we could get an idea of this. Obviously, the income is way too high for us to be able to claim the earned income tax credit at this level. Let's bring it down to that 16,480 just to get an idea of this curve. And we're going to go, okay, bring it back on over. Still no earned income tax credit because we're above the threshold. But once I bring it down a little bit below that, let's bring it down to 16,000. Now we have a little bit of the earned income tax credit being calculated. So notice when they use these thresholds, usually the IRS likes these end thresholds because it kind of makes them look better. You get the earned income tax credit up until your income is 16,480. It's like, yeah, but you're not getting the big credit of 560 at that level. It's almost totally phased out to $35 at that level. And you can take a look at the worksheet to kind of consider to understand the calculations for the credit. But the general idea that you want to have conceptually is this credit is going to be a lower income threshold credit. It goes up with earned income up to a certain threshold and then basically goes back down again. And it's also going to be dependent on the number of children. Now, another thing that could come up from time to time is if you had non taxable combat pay. So if you have combat pay, then the benefit usually would be, well, it's not going to be a taxable item, but you could have some situations where you're like, well, I want it to be taxable or at least be included for the calculation of the earned income tax credits. So that's usually a cue designation on the W2 form. So for example, if I have the same 16,000, the 10,000 of combat pay non taxable, if I go back on over, we still have the 16,000 W2 income. It's not included in the other 10,000 because it's not taxable. And it's not doing any adjustment to the $35 for the earned income credit. But you might say, hey, look, in this case, I would like you to add that to the calculation of the earned income tax credits. So elect to include non taxable combat pay. So if I do that, then it removed the credit entirely. Let's bring the combat pay down a little bit. Let's say it was only like $300. And so if I go back on over, now it brought it down to $12. So if I was under the threshold, then it might be a situation where the combat pay would bring it up. So for example, if I take the combat pay off, and let's start, let's say we had basically just 1000 of income 1000 of income, the worksheet is saying we only we got $75 of the earned income tax credit, according to the calculation, just $1,000 of income combat pay, not being included. And in that case, you might say, okay, look, I'd like the combat pay, let's say it was, let's say it was 5000 of combat pay. And I would like you to include that in the calculation of the earned income tax credit, then you would have a benefit of the combat pay on the earned income tax credit. So that doesn't happen all the time, but you get the best of both worlds possibly in that particular situation. So you want to have an idea of it. You're still for federal income tax purposes, getting tax on the 1000, but you might be able to include that combat pay in the calculation of say, earned income tax credit. All right, let's go back to the 1000 here and just kind of map this out and see if it makes sense in relation to the tables. So if I say we got $1000, we're going to say $1000 obviously that's below the threshold to pay owe any taxes, you wouldn't even have to file, but if you did file, you might want to still do it because you get like possibly $75 is what the software is calculating for the for the earned income tax credit. So let's say if I map this out on Excel here just for the fun of it, we're going to say that the wages is 1000 and we had $78 for 1000. And let's go back on over and say, okay, let's bring it up to 2000. If I go to 2000, we're at our 155 and I'm basically making a little table here. So 2155. I'm kind of mirroring the tables that we see here in the form 1040 instructions. So if you go to the 1040 instructions, you could find these tables, but these tables can be a little bit complicated to look at. So if we map it out, we could do it like maybe a little bit of a graph and kind of see the curve related to what zero children and then our income levels, right? So if I go back on over and say, okay, let's do this again and say we bring it up to 3000. 3000. Boom. We're at 231. 3000 is at 231. 231. Going back on over. Then let's go let's jump it up to 5000. We'll skip up to 5000. And now it's at 384. So we'll say 5000. 384. And let's go 7000. 7000. 7000 brings us up to 537. So 537. Let's go to 9000. 9000.