 Income tax 2021-2022. Software example. Earned income tax credit, the EIC with three qualifying children. Get ready to get refunds to the max. Dive in into income tax 2021-2022. We'll assert tax software. You don't need tax software to follow along, but you might want to have access to the forms and schedules, which you can find on the IRS website at irs.gov, irs.gov, starting point single, file or Adam Smith, living in Beverly Hills 90210. We've got the three dependents, which will all be qualifying children for the calculation of the earned income tax credit, which is our focus here in prior presentations. We talked about having no qualifying children, then one, then two, now we're at three and above, because if you go on above three, you're not getting any more benefit with regards to the calculation of the earned income tax credit, as we will see here. We're then starting with the income level at the $19,549. Unusual number. We'll explain it shortly. We then have the $12,550 for the standard deduction. The taxable income at the $6,999. The tax calculated then on page two, online $16,698. And then we're focused down here on the earned income tax credit, which is currently maxed out at the $6,728. We also have the refundable child tax credit. These things kind of get co-mingled together because they're both refundable credits and they are dependent in part upon the dependents and the qualifying children for the respective credits. We can see the fact that this is a refundable credit because we only have tax owed of the $6,98, and we don't have any payments that we put in place here and we're getting this big refund back, which really isn't a refund in this case because it's not reflecting a refund of an overpayment, but rather kind of a benefit type of program. That's kind of what it means to be a refundable type of credit, these two being the biggest two. Our focus here focusing on the earned income side of things. So the first thing that people often ask is going to be, well, do I qualify for the credit? And you often can look at tables to see where the maximum income levels are for three or more down below here. So if your income goes above $51,464 for non-married, $57,414 for married, you lose the credit. But we also want to know where the credit is maximized at, and this is the maximum credit for any number of qualifying children because three is the maximum that gives you any benefit. So if you have less than that for qualifying children, then the maximum amount you can have per qualifying children would be lower than that. If you have four children, as we'll see, the credit will not be going up above that. So the maximum amount of the credit is the $6,728. Now as you can see, we have then the income at the upper threshold of the $19,549. Here you could find these thresholds on the instructions to the Form 1040, looking at the Earned Income Tax Credit Tables, and we're down here at the end. So we're with three or more, and for the single or non-married, and we're up to the upper threshold, not for the non-married, the upper threshold was the $19,550 to get to that maximum amount. So that's the upper threshold of the income level. The lower threshold, we can go all the way down without decreasing the credit to the $14,950. So if I went down, for example, to the $14,950, $14,950, and then I go back to my Calculation Page 2, then we're still at that maximum amount here. What if I add another dependent, another qualifying child? It shouldn't have an impact. Let's test it out. Let's say I add another dependent, and we have four. We have four dependents now. We're going to say another dependent has been added, and so now we've got four on the books, but it caps out at three. They're all qualifying, and so they should be. Hopefully, I have that correctly calculated, and it still caps it out at three here, and so three or more is the cap on that. So then I'm going to go back on over. If I change my income to the lower threshold, which we did, if I go below that, then my credit starts going down. So if I bring it down to $10,000, for example, then the credit goes down. If I bring it down to $7,000 for the wages, then the credit goes down. If I bring it down to $5,000 on the wages, the credit goes down. If I bring it down to $2,000 on the wages, the credit goes down, and if I go down to like like a hundred dollars on the wages then the credit is going down. If I bring it back up to the maximum amount the income level at the fourteen nine fifty so I'm gonna say what if I bring it back up to the fourteen one four nine five oh one four nine nine five oh bringing it back up then we're at that maximum again six seven two eight I flatten out at that maximum I could stay at the maximum all the way up if single to getting up to the nineteen five four nine so I can bring it up to the nineteen one nine five four nine and we're still at the max if I go one dollar above that nineteen five then we're we've we've gone back down actually no I'm still I'm still there hold on a second we've got we've got page two the the six seven let me check it out again we're at oh I'm sorry it's the nineteen five fifty then it starts to go back down and then if I start going up above that say twenty five thousand then it starts to go back down so we've gone past the threshold thirty thousand then it's going back down if I go to thirty five thousand thirty five thousand then it's going down if I bring it up to forty thousand forty thousand then it's going down if I bring it up to forty five thousand then the credit is going down if I bring it up to fifty thousand then it's getting quite low and if I bring it up past fifty one five about then the credit has been has been removed. Okay so now let's imagine that that we had a low income that was below the threshold of like that five thousand and so that would be a lower a lower amount here but we had 2019 income so now my income is only five thousand I'm not maximizing out the credit I need more earned income I could look then to 2019 not 2020 but back to 2019 possibly making an election if that year was greater so I can go back on over let's do that again 2019 I could say let's make the election to use 2019 income and say this was let's say here it was at the the 19,000 of income in 2019 so now I could go back on over and I'm back up to the max because I'm using 2019 income even though in 2021 I only have five thousand which would be a lower amount so you could test out 2019 income let's remove that and that brings us back then to where we were before and the other thing is that combat pay that could come into play so we might have someone working in the military where they get paid combat pay that then let's say this was combat pay would be on box 12 with a Q in it and it wouldn't have any money in box one let's say that was the nine thousand then if I go back to the to the first page that that nine thousand isn't being included in income that's the benefit of combat pay we're not going to charge taxes on it is the general idea but it's it's not being included for the earned income tax credit it would be beneficial to include it for this calculation so if I was to say could you please include that combat pay for the EIC calculation then we get a higher amount here because the combat pay is now being included even though we're not being taxed still on the combat pay so you can kind of get the best of both worlds in that event with the combat pay okay let's bring it back let's take the combat pay out let's bring it bring it back up to that maximum amount which was the nineteen five four nine so nineteen five four nine and so that is going to be our maximum credit amount here and then we're going to imagine getting married now so now if you got if you got married you can imagine the situation of getting married to someone who has no qualifying children it doesn't really matter how many qualifying children the other person has because because you can't get any more benefit whether single or married past three as we saw so we already have four here if we only have three qualifying children and we got married to someone who has zero then it would still be at the three if they had one it would still be a three so it doesn't really matter how many qualifying children at this point for adam with regards to the earned income tax credit if they if they married someone else which is kind of interesting because you can imagine two people who basically are maximizing out their credit let's say you have two people that both have three or more qualifying children and let's pull out the trustee calculator calculator let's do some calculations and let's say that they were maxing out the credit at the six seven two eight and they were both single times two you would think they would both be getting a benefit then between the two of them of the thirteen four fifty six which is pretty significant and then if they got if they got married then you'd have double the income and again you wouldn't get any more benefit other than the three the three qualifying children so let's say they got married then and say now we've got married people and then the income is going to be for between the two of them let's say it was nineteen five forty nine so they're both on the upper threshold to max out the credit at single and then so now we're at the thirty nine uh ninety eight and the credit is at the three thousand eight sixty two which is you know significantly could be significantly different than if they you know significantly lower possibly and then if they if they both filed kind of single and obviously if you got married to to someone that earns something that would take us over the threshold the threshold being fifty seven thousand so if they made if they made like thirty thousand or let's say uh thirty five thousand let's say uh thirty eight thousand then we'd basically that would be at the fifty seven five forty then you would have someone that would be that would be taking us over the threshold and we wouldn't get any benefit in that case so it's just something to keep in mind because that you know that could be a significant that could be a significant change okay so now let's just take a look at the income levels so if I look at the married couple and say they're married where could we maximize out the credit if married well the upper threshold if married to max out the credit is down here at the twenty five twenty five four ninety nine i believe so if it was twenty five four ninety nine we could go okay income twenty five four ninety nine going back on over so there is our our income for three or more maximizing out because three is the max and we're at the maximum of the six seven two eight we could go as low as with the income can go as low as as we've seen the fourteen nine fifty so i can go all the way down to the fourteen nine fifty one four one four nine five oh and we still have then the maximum credit if i go below that then the credit starts going down so if i bring if i bring this down to ten thousand then the credit starts going down if i bring this down to seven thousand then the credit starts going down if i bring this down to four thousand then that's forty thousand that's different that's like an extra zero then the credit goes down if i bring this down to two thousand the credit goes down if i bring it down to something to like zero the credit goes down to zero let's maximize it back up again if i go back up to the max it's got to be at the fourteen nine fifty so i'm going to go back okay fourteen nine fifty that's the low end of the threshold to max out the credit and then again it goes as high as i could go as high as where it stays at that flat area to the twenty five uh twenty five four nine nine twenty five twenty five four nine nine there i'm still at the max if i go one dollar more twenty five five hundred then it starts to go back down and then if i keep going up to thirty thousand thirty thousand then it's going down if i go up to thirty five thousand then the credit's going down if i go up to forty thousand then the credit's going down if i go to forty five thousand then the credit's going down if i go to fifty thousand then the credit's going down if i go let's do two more times fifty five thousand then the credit's getting pretty small and if i go above the fifty seven four twenty about then the credit has disappeared entirely so that's a general idea of like kind of the curve you can keep in mind