Who Should Claim Children on EITC

Hypothetical Question and Claiming Earned Income Tax Credit EITC Example

 

EITC Situation

Not legally married, live together, two children. Earner Wages: Partner A: 47,661 Partner B: 24,274

Seems like partner B would qualify to get an actual refund based on the dependent children and the lower income. Whereas partner A would benefit from the exemptions against any tax due but would probably not get an actual return based on the dependent children since the higher income is disqualifies partner A from the EITC (I may be confusing the credit from the exemption).

I’m thinking the best way to determine this would be to plug in all our data into the tax software, but I’ll take any tips or advice you all have! Thanks in advance.

 

Potential EITC Scenarios on Claiming Children

  • If Partner A claims the kids: Due to pay $1,000
  • If Partner A doesn’t claim the kids: Due to pay $5000
  • If Partner B claims the kids: Due to receive $8000
  • If Partner B doesn’t claim the kids: Due to receive almost $2000

 

Who should claim children on EITC:

If you can decide amicably, then run the numbers in all possible combinations in an effort to figure out which combination is most optimal. Possibility include A takes 2 kids, B none; A and B each take 1; A takes none, B takes 2.

Normally, the benefits of claiming a dependent’s personal exemption, head of household status, and the child tax credit and/or earned income credit all go to the person claiming the dependent.

If you cannot decide amicably, then start with a review of the criteria for dependents in Publication 501; and especially the tie-breaker tests. These tests are used to determine which person gets to claim the kids in case people cannot decide.

Now this applies just to dependents, and the related tax credits. Partner A might be eligible for the head of household filing status. In general, it’s usually not the case that two people at the same house would both qualify for head of household. So Partner B probably would be eligible for the single filing status.