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2010 Form 1040

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2010 Form 1040

2010 form 1040 Other Methods of Depreciation Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: How To Figure the DeductionBasis Useful Life Salvage Value Methods To UseStraight Line Method Declining Balance Method Income Forecast Method How To Change Methods DispositionsSale or exchange. 2010 form 1040 Property not disposed of or abandoned. 2010 form 1040 Special rule for normal retirements from item accounts. 2010 form 1040 Abandoned property. 2010 form 1040 Single item accounts. 2010 form 1040 Multiple property account. 2010 form 1040 Topics - This chapter discusses: How to figure the deduction Methods to use How to change methods Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization Schedule C (Form 1040) Profit or Loss From Business If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. 2010 form 1040 If your property qualified for MACRS, you must depreciate it under MACRS. 2010 form 1040 See Publication 946. 2010 form 1040 However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. 2010 form 1040 Also, you can elect to exclude certain property from being depreciated under MACRS. 2010 form 1040 Property that you cannot depreciate using MACRS includes: Intangible property, Property you can elect to exclude from MACRS that you properly depreciate under a method that is not based on a term of years, Certain public utility property, Any motion picture film or video tape, Any sound recording, and Certain real and personal property placed in service before 1987. 2010 form 1040 Intangible property. 2010 form 1040   You cannot depreciate intangible property under ACRS or MACRS. 2010 form 1040 You depreciate intangible property using any other reasonable method, usually, the straight line method. 2010 form 1040 Note. 2010 form 1040 The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. 2010 form 1040 For more information, see chapter 12 of Publication 535. 2010 form 1040 Public utility property. 2010 form 1040   The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. 2010 form 1040 This type of property is subject to depreciation under a special rule. 2010 form 1040 Videocassettes. 2010 form 1040   If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. 2010 form 1040 You can depreciate the cost less salvage value of those videocassettes that have a useful life over one year using either: The straight line method, or The income forecast method. 2010 form 1040 The straight line method, salvage value, and useful life are discussed later under Methods To Use. 2010 form 1040 You can deduct in the year of purchase as a business expense the cost of any cassette that has a useful life of one year or less. 2010 form 1040 How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. 2010 form 1040 These methods are straight line and declining balance. 2010 form 1040 To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. 2010 form 1040 They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. 2010 form 1040 The amount of the deduction in any year also depends on which method of depreciation you choose. 2010 form 1040 Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. 2010 form 1040 The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. 2010 form 1040 Your original basis is usually the purchase price. 2010 form 1040 However, if you acquire property in some other way, such as inheriting it, getting it as a gift, or building it yourself, you have to figure your original basis in a different way. 2010 form 1040 Adjusted basis. 2010 form 1040   Events will often change the basis of property. 2010 form 1040 When this occurs, the changed basis is called the adjusted basis. 2010 form 1040 Some events, such as improvements you make, increase basis. 2010 form 1040 Events such as deducting casualty losses and depreciation decrease basis. 2010 form 1040 If basis is adjusted, the depreciation deduction may also have to be changed, depending on the reason for the adjustment and the method of depreciation you are using. 2010 form 1040   Publication 551 explains how to figure basis for property acquired in different ways. 2010 form 1040 It also discusses what items increase and decrease basis, how to figure adjusted basis, and how to allocate cost if you buy several pieces of property at one time. 2010 form 1040 Useful Life The useful life of a piece of property is an estimate of how long you can expect to use it in your trade or business, or to produce income. 2010 form 1040 It is the length of time over which you will make yearly depreciation deductions of your basis in the property. 2010 form 1040 It is how long it will continue to be useful to you, not how long the property will last. 2010 form 1040 Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. 2010 form 1040 The useful life can also be affected by technological improvements, progress in the arts, reasonably foreseeable economic changes, shifting of business centers, prohibitory laws, and other causes. 2010 form 1040 Consider all these factors before you arrive at a useful life for your property. 2010 form 1040 The useful life of the same type of property varies from user to user. 2010 form 1040 When you determine the useful life of your property, keep in mind your own experience with similar property. 2010 form 1040 You can use the general experience of the industry you are in until you are able to determine a useful life of your property from your own experience. 2010 form 1040 Change in useful life. 2010 form 1040   You base your estimate of useful life on certain facts. 2010 form 1040 If these facts change significantly, you can adjust your estimate of the remaining useful life. 2010 form 1040 However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. 2010 form 1040 Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. 2010 form 1040 You generally cannot depreciate property below a reasonable salvage value. 2010 form 1040 Determining salvage value. 2010 form 1040   Salvage value is the estimated value of property at the end of its useful life. 2010 form 1040 It is what you expect to get for the property if you sell it after you can no longer use it productively. 2010 form 1040 You must estimate the salvage value of a piece of property when you first acquire it. 2010 form 1040   Salvage value is affected both by how you use the property and how long you use it. 2010 form 1040 If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. 2010 form 1040 However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. 2010 form 1040 Changing salvage value. 2010 form 1040   Once you determine the salvage value for property, you should not change it merely because prices have changed. 2010 form 1040 However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. 2010 form 1040 When you redetermine the salvage value, take into account the facts that exist at the time. 2010 form 1040 Net salvage. 2010 form 1040   Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. 2010 form 1040 You can choose either salvage value or net salvage when you figure depreciation. 2010 form 1040 You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. 2010 form 1040 However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. 2010 form 1040 Your salvage value can never be less than zero. 2010 form 1040 Ten percent rule. 2010 form 1040   If you acquire personal property that has a useful life of 3 years or more, you can use an amount for salvage value that is less than your actual estimate. 2010 form 1040 You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. 2010 form 1040 If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. 2010 form 1040 Methods To Use Two methods of depreciation are the straight line and declining balance methods. 2010 form 1040 If ACRS or MACRS does not apply, you can use one of these methods. 2010 form 1040 The straight line and declining balance methods discussed in this section are not figured in the same way as straight line or declining balance methods under MACRS. 2010 form 1040 Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. 2010 form 1040 One of these methods was the straight line method. 2010 form 1040 This method was also used for intangible property. 2010 form 1040 It lets you deduct the same amount of depreciation each year. 2010 form 1040 To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. 2010 form 1040 Subtract the salvage value, if any, from the adjusted basis. 2010 form 1040 The balance is the total amount of depreciation you can take over the useful life of the property. 2010 form 1040 Divide the balance by the number of years remaining in the useful life. 2010 form 1040 This gives you the amount of your yearly depreciation deduction. 2010 form 1040 Unless there is a big change in adjusted basis, or useful life, this amount will stay the same throughout the time you depreciate the property. 2010 form 1040 If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. 2010 form 1040 Example. 2010 form 1040 In April 1994, Frank bought a franchise for $5,600. 2010 form 1040 It expires in 10 years. 2010 form 1040 This property is intangible property that cannot be depreciated under MACRS. 2010 form 1040 Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. 2010 form 1040 He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). 2010 form 1040 He must prorate the $560 for his 9 months of use in 1994. 2010 form 1040 This gives him a deduction of $420 ($560 ÷ 9/12). 2010 form 1040 In 1995, Frank can deduct $560 for the full year. 2010 form 1040 Declining Balance Method The declining balance method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. 2010 form 1040 The rate cannot be more than twice the straight line rate. 2010 form 1040 Rate of depreciation. 2010 form 1040   Under this method, you must determine your declining balance rate of depreciation. 2010 form 1040 The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. 2010 form 1040 (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. 2010 form 1040 ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. 2010 form 1040 Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. 2010 form 1040 Depreciation deductions. 2010 form 1040   After you determine the rate of depreciation, multiply the adjusted basis of the property by it. 2010 form 1040 This gives you the amount of your deduction. 2010 form 1040 For example, if your adjusted basis at the beginning of the first year is $10,000, and your declining balance rate is 20%, your depreciation deduction for the first year is $2,000 ($10,000 ÷ 20%). 2010 form 1040 To figure your depreciation deduction in the second year, you must first adjust the basis for the amount of depreciation you deducted in the first year. 2010 form 1040 Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). 2010 form 1040 Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). 2010 form 1040 Your depreciation deduction for the second year is $1,600. 2010 form 1040   As you can see from this example, your adjusted basis in the property gets smaller each year. 2010 form 1040 Also, under this method, deductions are larger in the earlier years and smaller in the later years. 2010 form 1040 You can make a change to the straight line method without consent. 2010 form 1040 Salvage value. 2010 form 1040   Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. 2010 form 1040 However, you cannot depreciate the property below its reasonable salvage value. 2010 form 1040 Determine salvage value using the rules discussed earlier, including the special 10% rule. 2010 form 1040 Example. 2010 form 1040 If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. 2010 form 1040 But if your estimate of salvage value was $900, you can only deduct $100. 2010 form 1040 This is because $100 is the amount that would lower your adjusted basis to equal salvage value. 2010 form 1040 Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. 2010 form 1040 You can group the videocassettes by title for making this projection. 2010 form 1040 You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. 2010 form 1040 The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. 2010 form 1040 For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. 2010 form 1040 How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. 2010 form 1040 If you change your method of depreciation, it is generally a change in your method of accounting. 2010 form 1040 You must get IRS consent before making the change. 2010 form 1040 However, you do not need permission for certain changes in your method of depreciation. 2010 form 1040 The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. 2010 form 1040 For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. 2010 form 1040 Change to the straight line method. 2010 form 1040   You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. 2010 form 1040 However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. 2010 form 1040 When the change is made, figure depreciation based on your adjusted basis in the property at that time. 2010 form 1040 Your adjusted basis takes into account all previous depreciation deductions. 2010 form 1040 Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. 2010 form 1040   You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. 2010 form 1040 You cannot make the change on an amended return filed after the due date of the original return (including extensions). 2010 form 1040   When you make the change, attach a statement to your tax return showing: When you acquired the property, Its original cost or other original basis, The total amount claimed for depreciation and other allowances since you acquired it, Its salvage value and remaining useful life, and A description of the property and its use. 2010 form 1040   After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS. 2010 form 1040 Changes that require permission. 2010 form 1040   For most other changes in method of depreciation, you must get permission from the IRS. 2010 form 1040 To request a change in method of depreciation, file Form 3115. 2010 form 1040 File the application within the first 180 days of the tax year the change is to become effective. 2010 form 1040 In most cases, there is a user fee that must accompany Form 3115. 2010 form 1040 See the instructions for Form 3115 to determine if a fee is required. 2010 form 1040 Changes granted automatically. 2010 form 1040   The IRS automatically approves certain changes of a method of depreciation. 2010 form 1040 But, you must file Form 3115 for these automatic changes. 2010 form 1040   However, IRS can deny permission if Form 3115 is not filed on time. 2010 form 1040 For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. 2010 form 1040 B. 2010 form 1040 420. 2010 form 1040 Changes for which approval is not automatic. 2010 form 1040   The automatic change procedures do not apply to: Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System), Class Life Asset Depreciation Range System, and Public utility property. 2010 form 1040   You must request and receive permission for these changes. 2010 form 1040 To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective. 2010 form 1040 Change from an improper method. 2010 form 1040   If the IRS disallows the method you are using, you do not need permission to change to a proper method. 2010 form 1040 You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. 2010 form 1040 If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. 2010 form 1040 However, you must file the amended return before the filing date for the next tax year. 2010 form 1040 Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. 2010 form 1040 You can do this by selling, exchanging, or abandoning the item of property. 2010 form 1040 You can also withdraw it from use without disposing of it. 2010 form 1040 For example, you could place it in a supplies or scrap account. 2010 form 1040 Retirements can be either normal or abnormal depending on all facts and circumstances. 2010 form 1040 The rules discussed next do not apply to MACRS and ACRS property. 2010 form 1040 Normal retirement. 2010 form 1040   A normal retirement is a permanent withdrawal of depreciable property from use if the following apply: The retirement is made within the useful life you estimated originally, and The property has reached a condition at which you customarily retire or would retire similar property from use. 2010 form 1040 A retirement is generally considered normal unless you can show that you retired the property because of a reason you did not consider when you originally estimated the useful life of the property. 2010 form 1040 Abnormal retirement. 2010 form 1040   A retirement can be abnormal if you withdraw the property early or under other circumstances. 2010 form 1040 For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. 2010 form 1040 Gain or loss on retirement. 2010 form 1040   There are special rules for figuring the gain or loss on retirement of property. 2010 form 1040 The gain or loss will depend on several factors. 2010 form 1040 These include the type of withdrawal, if the withdrawal was from a single property or multiple property account, and if the retirement was normal or abnormal. 2010 form 1040 A single property account contains only one item of property. 2010 form 1040 A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. 2010 form 1040 Sale or exchange. 2010 form 1040   If property is retired by sale or exchange, you figure gain or loss by the usual rules that apply to sales or other dispositions of property. 2010 form 1040 See Publication 544. 2010 form 1040 Property not disposed of or abandoned. 2010 form 1040   If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. 2010 form 1040 You are allowed a loss in such a case, but only if the retirement is: An abnormal retirement, A normal retirement from a single property account in which you determined the life of each item of property separately, or A normal retirement from a multiple property account in which the depreciation rate is based on the maximum expected life of the longest lived item of property and the loss occurs before the expiration of the full useful life. 2010 form 1040 However, you are not allowed a loss if the depreciation rate is based on the average useful life of the items of property in the account. 2010 form 1040   To figure your loss, subtract the estimated salvage or fair market value of the property at the date of retirement, whichever is more, from its adjusted basis. 2010 form 1040 Special rule for normal retirements from item accounts. 2010 form 1040   You can generally deduct losses upon retirement of a few depreciable items of property with similar useful lives, if: You account for each one in a separate account, and You use the average useful life to figure depreciation. 2010 form 1040 However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. 2010 form 1040   If you have a large number of depreciable property items and use average useful lives to figure depreciation, you cannot deduct the losses upon normal retirements from these accounts. 2010 form 1040 Abandoned property. 2010 form 1040   If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. 2010 form 1040 However, your intent must be to discard the property so that you will not use it again or retrieve it for sale, exchange, or other disposition. 2010 form 1040 Basis of property retired. 2010 form 1040   The basis for figuring gain or loss on the retirement of property is its adjusted basis at the time of retirement, as determined in the following discussions. 2010 form 1040 Single item accounts. 2010 form 1040   If an item of property is accounted for in a single item account, the adjusted basis is the basis you would use to figure gain or loss for a sale or exchange of the property. 2010 form 1040 This is generally the cost or other basis of the item of property less depreciation. 2010 form 1040 See Publication 551. 2010 form 1040 Multiple property account. 2010 form 1040   For a normal retirement from a multiple property account, if you figured depreciation using the average expected useful life, the adjusted basis is the salvage value estimated for the item of property when it was originally acquired. 2010 form 1040 If you figured depreciation using the maximum expected useful life of the longest lived item of property in the account, you must use the depreciation method used for the multiple property account and a rate based on the maximum expected useful life of the item of property retired. 2010 form 1040   You make the adjustment for depreciation for an abnormal retirement from a multiple property account at the rate that would be proper if the item of property was depreciated in a single property account. 2010 form 1040 The method of depreciation used for the multiple property account is used. 2010 form 1040 You base the rate on either the average expected useful life or the maximum expected useful life of the retired item of property, depending on the method used to determine the depreciation rate for the multiple property account. 2010 form 1040 Prev  Up  Next   Home   More Online Publications
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The 2010 Form 1040

2010 form 1040 Publication 596 - Main Content Table of Contents Chapter 1—Rules for EveryoneRule 1—Adjusted Gross Income (AGI) Limits Rule 2—You Must Have a Valid Social Security Number (SSN) Rule 3—Your Filing Status Cannot Be Married Filing Separately Rule 4—You Must Be a U. 2010 form 1040 S. 2010 form 1040 Citizen or Resident Alien All Year Rule 5—You Cannot File Form 2555 or Form 2555-EZ Rule 6—Your Investment Income Must Be $3,300 or Less Rule 7—You Must Have Earned Income Chapter 2—Rules If You Have a Qualifying ChildRule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer Chapter 3—Rules If You Do Not Have a Qualifying ChildRule 11—You Must Be at Least Age 25 but Under Age 65 Rule 12—You Cannot Be the Dependent of Another Person Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer Rule 14—You Must Have Lived in the United States More Than Half of the Year Chapter 4—Figuring and Claiming the EICRule 15—Earned Income Limits IRS Will Figure the EIC for You How To Figure the EIC Yourself Schedule EIC Chapter 5—Disallowance of the EICForm 8862 Are You Prohibited From Claiming the EIC for a Period of Years? Chapter 6—Detailed ExamplesExample 1—Sharon Rose Example 2—Cynthia and Jerry Grey Chapter 1—Rules for Everyone This chapter discusses Rules 1 through 7. 2010 form 1040 You must meet all seven rules to qualify for the earned income credit. 2010 form 1040 If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the publication. 2010 form 1040 If you meet all seven rules in this chapter, then read either chapter 2 or chapter 3 (whichever applies) for more rules you must meet. 2010 form 1040 Rule 1—Adjusted Gross Income (AGI) Limits Your adjusted gross income (AGI) must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 2010 form 1040 Adjusted gross income (AGI). 2010 form 1040   AGI is the amount on line 4 of Form 1040EZ, line 22 of Form 1040A, or line 38 of Form 1040. 2010 form 1040   If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. 2010 form 1040 You do not need to read the rest of this publication. 2010 form 1040 Example—AGI is more than limit. 2010 form 1040 Your AGI is $38,550, you are single, and you have one qualifying child. 2010 form 1040 You cannot claim the EIC because your AGI is not less than $37,870. 2010 form 1040 However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. 2010 form 1040 Community property. 2010 form 1040   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. 2010 form 1040 This is different from the community property rules that apply under Rule 7. 2010 form 1040 Rule 2—You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). 2010 form 1040 Any qualifying child listed on Schedule EIC also must have a valid SSN. 2010 form 1040 (See Rule 8 if you have a qualifying child. 2010 form 1040 ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. 2010 form 1040 An example of a federally funded benefit is Medicaid. 2010 form 1040 If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. 2010 form 1040 S. 2010 form 1040 citizen or permanent resident, ask the SSA for a new social security card without the legend. 2010 form 1040 If you get the new card after you have already filed your return, you can file an amended return on Form 1040X, Amended U. 2010 form 1040 S. 2010 form 1040 Individual Income Tax Return, to claim the EIC. 2010 form 1040 U. 2010 form 1040 S. 2010 form 1040 citizen. 2010 form 1040   If you were a U. 2010 form 1040 S. 2010 form 1040 citizen when you received your SSN, you have a valid SSN. 2010 form 1040 Valid for work only with INS authorization or DHS authorization. 2010 form 1040   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. 2010 form 1040 SSN missing or incorrect. 2010 form 1040   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. 2010 form 1040 Other taxpayer identification number. 2010 form 1040   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). 2010 form 1040 ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. 2010 form 1040 No SSN. 2010 form 1040   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2010 form 1040 You cannot claim the EIC. 2010 form 1040 Getting an SSN. 2010 form 1040   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5 with the SSA. 2010 form 1040 You can get Form SS-5 online at www. 2010 form 1040 socialsecurity. 2010 form 1040 gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. 2010 form 1040 Filing deadline approaching and still no SSN. 2010 form 1040   If the filing deadline is approaching and you still do not have an SSN, you have two choices. 2010 form 1040 Request an automatic 6-month extension of time to file your return. 2010 form 1040 You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. 2010 form 1040 S. 2010 form 1040 Individual Income Tax Return. 2010 form 1040 For more information, see the instructions for Form 4868. 2010 form 1040 File the return on time without claiming the EIC. 2010 form 1040 After receiving the SSN, file an amended return, Form 1040X, claiming the EIC. 2010 form 1040 Attach a filled-in Schedule EIC, Earned Income Credit, if you have a qualifying child. 2010 form 1040 Rule 3—Your Filing Status Cannot Be “Married Filing Separately” If you are married, you usually must file a joint return to claim the EIC. 2010 form 1040 Your filing status cannot be “Married filing separately. 2010 form 1040 ” Spouse did not live with you. 2010 form 1040   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. 2010 form 1040 In that case, you may be able to claim the EIC. 2010 form 1040 For detailed information about filing as head of household, see Publication 501, Exemptions, Standard Deduction, and Filing Information. 2010 form 1040 Rule 4—You Must Be a U. 2010 form 1040 S. 2010 form 1040 Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. 2010 form 1040 You can use that filing status only if one spouse is a U. 2010 form 1040 S. 2010 form 1040 citizen or resident alien and you choose to treat the nonresident spouse as a U. 2010 form 1040 S. 2010 form 1040 resident. 2010 form 1040 If you make this choice, you and your spouse are taxed on your worldwide income. 2010 form 1040 If you need more information on making this choice, get Publication 519, U. 2010 form 1040 S. 2010 form 1040 Tax Guide for Aliens. 2010 form 1040 If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). 2010 form 1040 Rule 5—You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 2010 form 1040 You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. 2010 form 1040 U. 2010 form 1040 S. 2010 form 1040 possessions are not foreign countries. 2010 form 1040 See Publication 54, Tax Guide for U. 2010 form 1040 S. 2010 form 1040 Citizens and Resident Aliens Abroad, for more detailed information. 2010 form 1040 Rule 6—Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. 2010 form 1040 If your investment income is more than $3,300, you cannot claim the credit. 2010 form 1040 Form 1040EZ. 2010 form 1040   If you file Form 1040EZ, your investment income is the total of the amount on line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. 2010 form 1040 Form 1040A. 2010 form 1040   If you file Form 1040A, your investment income is the total of the amounts on lines 8a (taxable interest), 8b (tax-exempt interest), 9a (ordinary dividends), and 10 (capital gain distributions) on that form. 2010 form 1040 Form 1040. 2010 form 1040   If you file Form 1040, use Worksheet 1 in this chapter to figure your investment income. 2010 form 1040    Worksheet 1. 2010 form 1040 Investment Income If You Are Filing Form 1040 Use this worksheet to figure investment income for the earned income credit when you file Form 1040. 2010 form 1040 Interest and Dividends         1. 2010 form 1040 Enter any amount from Form 1040, line 8a 1. 2010 form 1040   2. 2010 form 1040 Enter any amount from Form 1040, line 8b, plus any amount on Form 8814, line 1b 2. 2010 form 1040   3. 2010 form 1040 Enter any amount from Form 1040, line 9a 3. 2010 form 1040   4. 2010 form 1040 Enter the amount from Form 1040, line 21, that is from Form 8814 if you are filing that form to report your child's interest and dividend income on your return. 2010 form 1040 (If your child received an Alaska Permanent Fund dividend, use Worksheet 2 in this chapter to figure the amount to enter on this line. 2010 form 1040 ) 4. 2010 form 1040   Capital Gain Net Income         5. 2010 form 1040 Enter the amount from Form 1040, line 13. 2010 form 1040 If the amount on that line is a loss, enter -0- 5. 2010 form 1040       6. 2010 form 1040 Enter any gain from Form 4797, Sales of Business Property, line 7. 2010 form 1040 If the amount on that line is a loss, enter -0-. 2010 form 1040 (But, if you completed lines 8 and 9 of Form 4797, enter the amount from line 9 instead. 2010 form 1040 ) 6. 2010 form 1040       7. 2010 form 1040 Substract line 6 of this worksheet from line 5 of this worksheet. 2010 form 1040 (If the result is less than zero, enter -0-. 2010 form 1040 ) 7. 2010 form 1040   Royalties and Rental Income From Personal Property         8. 2010 form 1040 Enter any royalty income from Schedule E, line 23b, plus any income from the rental of personal property shown on Form 1040, line 21 8. 2010 form 1040       9. 2010 form 1040 Enter any expenses from Schedule E, line 20, related to royalty income, plus any expenses from the rental of personal property deducted on Form 1040, line 36 9. 2010 form 1040       10. 2010 form 1040 Subtract the amount on line 9 of this worksheet from the amount on line 8. 2010 form 1040 (If the result is less than zero, enter -0-. 2010 form 1040 ) 10. 2010 form 1040   Passive Activities         11. 2010 form 1040 Enter the total of any net income from passive activities (such as income included on Schedule E, line 26, 29a (col. 2010 form 1040 (g)), 34a (col. 2010 form 1040 (d)), or 40). 2010 form 1040 (See instructions below for lines 11 and 12. 2010 form 1040 ) 11. 2010 form 1040       12. 2010 form 1040 Enter the total of any losses from passive activities (such as losses included on Schedule E, line 26, 29b (col. 2010 form 1040 (f)), 34b (col. 2010 form 1040 (c)), or 40). 2010 form 1040 (See instructions below for lines 11 and 12. 2010 form 1040 ) 12. 2010 form 1040       13. 2010 form 1040 Combine the amounts on lines 11 and 12 of this worksheet. 2010 form 1040 (If the result is less than zero, enter -0-. 2010 form 1040 ) 13. 2010 form 1040   14. 2010 form 1040 Add the amounts on lines 1, 2, 3, 4, 7, 10, and 13. 2010 form 1040 Enter the total. 2010 form 1040 This is your investment income 14. 2010 form 1040   15. 2010 form 1040 Is the amount on line 14 more than $3,300? ❑ Yes. 2010 form 1040 You cannot take the credit. 2010 form 1040  ❑ No. 2010 form 1040 Go to Step 3 of the Form 1040 instructions for lines 64a and 64b to find out if you can take the credit (unless you are using this publication to find out if you can take the credit; in that case, go to Rule 7, next). 2010 form 1040       Instructions for lines 11 and 12. 2010 form 1040 In figuring the amount to enter on lines 11 and 12, do not take into account any royalty income (or loss) included on line 26 of Schedule E or any amount included in your earned income. 2010 form 1040 To find out if the income on line 26 or line 40 of Schedule E is from a passive activity, see the Schedule E instructions. 2010 form 1040 If any of the rental real estate income (or loss) included on Schedule E, line 26, is not from a passive activity, print “NPA” and the amount of that income (or loss) on the dotted line next to line 26. 2010 form 1040 Worksheet 2. 2010 form 1040 Worksheet for Line 4 of Worksheet 1 Complete this worksheet only if Form 8814 includes an Alaska Permanent Fund dividend. 2010 form 1040 Note. 2010 form 1040 Fill out a separate Worksheet 2 for each Form 8814. 2010 form 1040     1. 2010 form 1040 Enter the amount from Form 8814, line 2a 1. 2010 form 1040   2. 2010 form 1040 Enter the amount from Form 8814, line 2b 2. 2010 form 1040   3. 2010 form 1040 Subtract line 2 from line 1 3. 2010 form 1040   4. 2010 form 1040 Enter the amount from Form 8814, line 1a 4. 2010 form 1040   5. 2010 form 1040 Add lines 3 and 4 5. 2010 form 1040   6. 2010 form 1040 Enter the amount of the child's Alaska Permanent Fund dividend 6. 2010 form 1040   7. 2010 form 1040 Divide line 6 by line 5. 2010 form 1040 Enter the result as a decimal (rounded to at least three places) 7. 2010 form 1040   8. 2010 form 1040 Enter the amount from Form 8814, line 12 8. 2010 form 1040   9. 2010 form 1040 Multiply line 7 by line 8 9. 2010 form 1040   10. 2010 form 1040 Subtract line 9 from line 8. 2010 form 1040 Enter the result on line 4 of Worksheet 1 10. 2010 form 1040     (If filing more than one Form 8814, enter on line 4 of Worksheet 1 the total of the amounts on line 10 of all Worksheets 2. 2010 form 1040 )     Example—completing Worksheet 2. 2010 form 1040 Your 10-year-old child has taxable interest income of $400, an Alaska Permanent Fund dividend of $1,000, and ordinary dividends of $1,100, of which $500 are qualified dividends. 2010 form 1040 You choose to report this income on your return. 2010 form 1040 You enter $400 on line 1a of Form 8814, $2,100 ($1,000 + $1,100) on line 2a, and $500 on line 2b. 2010 form 1040 After completing lines 4 through 11, you enter $400 on line 12 of Form 8814 and line 21 of Form 1040. 2010 form 1040 On Worksheet 2, you enter $2,100 on line 1, $500 on line 2, $1,600 on line 3, $400 on line 4, $2,000 on line 5, $1,000 on line 6, 0. 2010 form 1040 500 on line 7, $400 on line 8, $200 on line 9, and $200 on line 10. 2010 form 1040 You then enter $200 on line 4 of Worksheet 1. 2010 form 1040 Rule 7—You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. 2010 form 1040 If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. 2010 form 1040 If you are an employee, earned income includes all the taxable income you get from your employer. 2010 form 1040 Rule 15 has information that will help you figure the amount of your earned income. 2010 form 1040 If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the Form 1040 instructions. 2010 form 1040 Earned Income Earned income includes all of the following types of income. 2010 form 1040 Wages, salaries, tips, and other taxable employee pay. 2010 form 1040 Employee pay is earned income only if it is taxable. 2010 form 1040 Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 2010 form 1040 But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained later in this chapter. 2010 form 1040 Net earnings from self-employment. 2010 form 1040 Gross income received as a statutory employee. 2010 form 1040 Wages, salaries, and tips. 2010 form 1040    Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. 2010 form 1040 You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). 2010 form 1040 Nontaxable combat pay election. 2010 form 1040   You can elect to include your nontaxable combat pay in earned income for the earned income credit. 2010 form 1040 The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. 2010 form 1040 Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. 2010 form 1040 For details, see Nontaxable combat pay in chapter 4. 2010 form 1040 Net earnings from self-employment. 2010 form 1040   You may have net earnings from self-employment if: You own your own business, or You are a minister or member of a religious order. 2010 form 1040 Minister's housing. 2010 form 1040   The rental value of a home or a housing allowance provided to a minister as part of the minister's pay generally is not subject to income tax but is included in net earnings from self-employment. 2010 form 1040 For that reason, it is included in earned income for the EIC (except in the cases described in Approved Form 4361 or Form 4029 , below). 2010 form 1040 Statutory employee. 2010 form 1040   You are a statutory employee if you receive a Form W-2 on which the “Statutory employee” box (box 13) is checked. 2010 form 1040 You report your income and expenses as a statutory employee on Schedule C or C-EZ (Form 1040). 2010 form 1040 Strike benefits. 2010 form 1040   Strike benefits paid by a union to its members are earned income. 2010 form 1040 Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. 2010 form 1040 Each approved form exempts certain income from social security taxes. 2010 form 1040 Each form is discussed here in terms of what is or is not earned income for the EIC. 2010 form 1040 Form 4361. 2010 form 1040   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. 2010 form 1040 This includes wages, salaries, tips, and other taxable employee compensation. 2010 form 1040 A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. 2010 form 1040 Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. 2010 form 1040 Examples include fees for performing marriages and honoraria for delivering speeches. 2010 form 1040 Form 4029. 2010 form 1040   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. 2010 form 1040 However, amounts you received as a self-employed individual do not count as earned income. 2010 form 1040 Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. 2010 form 1040 Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. 2010 form 1040 Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. 2010 form 1040 You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. 2010 form 1040 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. 2010 form 1040 Report taxable pension payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b. 2010 form 1040 Disability insurance payments. 2010 form 1040   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. 2010 form 1040 It does not matter whether you have reached minimum retirement age. 2010 form 1040 If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. 2010 form 1040 ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. 2010 form 1040 Do not include any of these items in your earned income. 2010 form 1040 Earnings while an inmate. 2010 form 1040   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. 2010 form 1040 This includes amounts for work performed while in a work release program or while in a halfway house. 2010 form 1040 Workfare payments. 2010 form 1040   Nontaxable workfare payments are not earned income for the EIC. 2010 form 1040 These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. 2010 form 1040 Community property. 2010 form 1040   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. 2010 form 1040 That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. 2010 form 1040 Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. 2010 form 1040 Nevada, Washington, and California domestic partners. 2010 form 1040   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. 2010 form 1040 Your earned income for the EIC does not include any amount earned by your partner. 2010 form 1040 Your earned income includes the entire amount you earned. 2010 form 1040 For details, see Publication 555. 2010 form 1040 Conservation Reserve Program (CRP) payments. 2010 form 1040   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. 2010 form 1040 Nontaxable military pay. 2010 form 1040   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. 2010 form 1040 Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). 2010 form 1040 See Publication 3, Armed Forces' Tax Guide, for more information. 2010 form 1040    Combat pay. 2010 form 1040 You can elect to include your nontaxable combat pay in earned income for the EIC. 2010 form 1040 See Nontaxable combat pay in chapter 4. 2010 form 1040 Chapter 2—Rules If You Have a Qualifying Child If you have met all the rules in chapter 1, use this chapter to see if you have a qualifying child. 2010 form 1040 This chapter discusses Rules 8 through 10. 2010 form 1040 You must meet all three of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit with a qualifying child. 2010 form 1040 You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. 2010 form 1040 (You cannot file Form 1040EZ. 2010 form 1040 ) You also must complete Schedule EIC and attach it to your return. 2010 form 1040 If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. 2010 form 1040 No qualifying child. 2010 form 1040   If you do not meet Rule 8, you do not have a qualifying child. 2010 form 1040 Read chapter 3 to find out if you can get the earned income credit without a qualifying child. 2010 form 1040 Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. 2010 form 1040 The fours tests are: Relationship, Age, Residency, and Joint return. 2010 form 1040 The four tests are illustrated in Figure 1. 2010 form 1040 The paragraphs that follow contain more information about each test. 2010 form 1040 Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). 2010 form 1040 The following definitions clarify the relationship test. 2010 form 1040 Adopted child. 2010 form 1040   An adopted child is always treated as your own child. 2010 form 1040 The term “adopted child” includes a child who was lawfully placed with you for legal adoption. 2010 form 1040 Foster child. 2010 form 1040   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. 2010 form 1040 (An authorized placement agency includes a state or local government agency. 2010 form 1040 It also includes a tax-exempt organization licensed by a state. 2010 form 1040 In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. 2010 form 1040 ) Example. 2010 form 1040 Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. 2010 form 1040 Debbie is your foster child. 2010 form 1040 Figure 1. 2010 form 1040 Tests for Qualifying Child Please click here for the text description of the image. 2010 form 1040 Conditions for Qualifying Child Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly, or Permanently and totally disabled at any time during 2013, regardless of age. 2010 form 1040 The following examples and definitions clarify the age test. 2010 form 1040 Example 1—child not under age 19. 2010 form 1040 Your son turned 19 on December 10. 2010 form 1040 Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. 2010 form 1040 Example 2—child not younger than you or your spouse. 2010 form 1040 Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. 2010 form 1040 He is not disabled. 2010 form 1040 Both you and your spouse are 21 years old, and you file a joint return. 2010 form 1040 Your brother is not your qualifying child because he is not younger than you or your spouse. 2010 form 1040 Example 3—child younger than your spouse but not younger than you. 2010 form 1040 The facts are the same as in Example 2 except that your spouse is 25 years old. 2010 form 1040 Because your brother is younger than your spouse, he is your qualifying child, even though he is not younger than you. 2010 form 1040 Student defined. 2010 form 1040   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. 2010 form 1040   The 5 calendar months need not be consecutive. 2010 form 1040   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. 2010 form 1040 School defined. 2010 form 1040   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. 2010 form 1040 However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. 2010 form 1040 Vocational high school students. 2010 form 1040   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. 2010 form 1040 Permanently and totally disabled. 2010 form 1040   Your child is permanently and totally disabled if both of the following apply. 2010 form 1040 He or she cannot engage in any substantial gainful activity because of a physical or mental condition. 2010 form 1040 A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. 2010 form 1040 Residency Test Your child must have lived with you in the United States for more than half of 2013. 2010 form 1040 The following definitions clarify the residency test. 2010 form 1040 United States. 2010 form 1040   This means the 50 states and the District of Columbia. 2010 form 1040 It does not include Puerto Rico or U. 2010 form 1040 S. 2010 form 1040 possessions such as Guam. 2010 form 1040 Homeless shelter. 2010 form 1040   Your home can be any location where you regularly live. 2010 form 1040 You do not need a traditional home. 2010 form 1040 For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. 2010 form 1040 Military personnel stationed outside the United States. 2010 form 1040   U. 2010 form 1040 S. 2010 form 1040 military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 2010 form 1040 Extended active duty. 2010 form 1040   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 2010 form 1040 Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 2010 form 1040 Birth or death of child. 2010 form 1040    child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. 2010 form 1040 Temporary absences. 2010 form 1040   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. 2010 form 1040 Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. 2010 form 1040 Kidnapped child. 2010 form 1040   A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. 2010 form 1040 The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. 2010 form 1040 This treatment applies for all years until the child is returned. 2010 form 1040 However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. 2010 form 1040   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. 2010 form 1040 Joint Return Test To meet this test, the child cannot file a joint return for the year. 2010 form 1040 Exception. 2010 form 1040   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. 2010 form 1040 Example 1—child files joint return. 2010 form 1040 You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. 2010 form 1040 He earned $25,000 for the year. 2010 form 1040 The couple files a joint return. 2010 form 1040 Because your daughter and her husband file a joint return, she is not your qualifying child. 2010 form 1040 Example 2—child files joint return to get refund of tax withheld. 2010 form 1040 Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. 2010 form 1040 They do not have a child. 2010 form 1040 Neither is required to file a tax return. 2010 form 1040 Taxes were taken out of their pay, so they file a joint return only to get a refund of the withheld taxes. 2010 form 1040 The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. 2010 form 1040 Example 3—child files joint return to claim American opportunity credit. 2010 form 1040 The facts are the same as in Example 2 except no taxes were taken out of your son's pay. 2010 form 1040 He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. 2010 form 1040 Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to claim a refund of income tax withheld or estimated tax paid. 2010 form 1040 The exception to the joint return test does not apply, so your son is not your qualifying child. 2010 form 1040 Married child. 2010 form 1040   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) described later. 2010 form 1040    Social security number. 2010 form 1040 Your qualifying child must have a valid social security number (SSN), unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. 2010 form 1040 You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. 2010 form 1040   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. 2010 form 1040 For more information about SSNs, see Rule 2. 2010 form 1040 Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. 2010 form 1040 However, only one of these persons can actually treat the child as a qualifying child. 2010 form 1040 Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). 2010 form 1040 The exemption for the child. 2010 form 1040 The child tax credit. 2010 form 1040 Head of household filing status. 2010 form 1040 The credit for child and dependent care expenses. 2010 form 1040 The exclusion for dependent care benefits. 2010 form 1040 The EIC. 2010 form 1040 The other person cannot take any of these benefits based on this qualifying child. 2010 form 1040 In other words, you and the other person cannot agree to divide these tax benefits between you. 2010 form 1040 The other person cannot take any of these tax benefits unless he or she has a different qualifying child. 2010 form 1040 The tiebreaker rules, which follow, explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. 2010 form 1040 However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. 2010 form 1040 Tiebreaker rules. 2010 form 1040   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. 2010 form 1040 If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. 2010 form 1040 If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. 2010 form 1040 If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. 2010 form 1040 If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 2010 form 1040 If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. 2010 form 1040 If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. 2010 form 1040 If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. 2010 form 1040 See Example 8. 2010 form 1040   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. 2010 form 1040 See Examples 1 through 13. 2010 form 1040   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in chapter 3 for people who do not have a qualifying child. 2010 form 1040 If the other person cannot claim the EIC. 2010 form 1040   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. 2010 form 1040 See Examples 6 and 7. 2010 form 1040 But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier in this chapter. 2010 form 1040 Examples. 2010 form 1040    The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. 2010 form 1040 Example 1—child lived with parent and grandparent. 2010 form 1040 You and your 2-year-old son Jimmy lived with your mother all year. 2010 form 1040 You are 25 years old, unmarried, and your AGI is $9,000. 2010 form 1040 Your only income was $9,000 from a part-time job. 2010 form 1040 Your mother's only income was $20,000 from her job, and her AGI is $20,000. 2010 form 1040 Jimmy's father did not live with you or Jimmy. 2010 form 1040 The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. 2010 form 1040 Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. 2010 form 1040 However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier in this chapter for which that person qualifies). 2010 form 1040 He is not a qualifying child of anyone else, including his father. 2010 form 1040 If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). 2010 form 1040 Example 2—parent has higher AGI than grandparent. 2010 form 1040 The facts are the same as in Example 1 except your AGI is $25,000. 2010 form 1040 Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. 2010 form 1040 Only you can claim him. 2010 form 1040 Example 3—two persons claim same child. 2010 form 1040 The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. 2010 form 1040 In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. 2010 form 1040 The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. 2010 form 1040 Example 4—qualifying children split between two persons. 2010 form 1040 The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. 2010 form 1040 Only one of you can claim each child. 2010 form 1040 However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. 2010 form 1040 For example, if you claim one child, your mother can claim the other two. 2010 form 1040 Example 5—taxpayer who is a qualifying child. 2010 form 1040 The facts are the same as in Example 1 except that you are only 18 years old. 2010 form 1040 This means you are a qualifying child of your mother. 2010 form 1040 Because of Rule 10, discussed next, you cannot claim the EIC and cannot claim your son as a qualifying child. 2010 form 1040 Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. 2010 form 1040 If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. 2010 form 1040 Example 6—grandparent with too much earned income to claim EIC. 2010 form 1040 The facts are the same as in Example 1 except that your mother earned $50,000 from her job. 2010 form 1040 Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. 2010 form 1040 Example 7—parent with too much earned income to claim EIC. 2010 form 1040 The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. 2010 form 1040 Your earned income is too high for you to claim the EIC. 2010 form 1040 But your mother cannot claim the EIC either, because her AGI is not higher than yours. 2010 form 1040 Example 8—child lived with both parents and grandparent. 2010 form 1040 The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have AGI of $30,000 on a joint return. 2010 form 1040 If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. 2010 form 1040 Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. 2010 form 1040 In other words, each parent's AGI can be treated as $15,000. 2010 form 1040 Example 9—separated parents. 2010 form 1040 You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. 2010 form 1040 In August and September, Joey lived with you. 2010 form 1040 For the rest of the year, Joey lived with your husband, who is Joey's father. 2010 form 1040 Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. 2010 form 1040 At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the Special rule for divorced or separated parents (or parents who live apart) does not apply. 2010 form 1040 You and your husband will file separate returns. 2010 form 1040 Your husband agrees to let you treat Joey as a qualifying child. 2010 form 1040 This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. 2010 form 1040 However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. 2010 form 1040 See Rule 3. 2010 form 1040 Example 10—separated parents claim same child. 2010 form 1040 The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. 2010 form 1040 In this case, only your husband will be allowed to treat Joey as a qualifying child. 2010 form 1040 This is because, during 2013, the boy lived with him longer than with you. 2010 form 1040 You cannot claim the EIC (either with or without a qualifying child). 2010 form 1040 However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. 2010 form 1040 See Rule 3. 2010 form 1040 Example 11—unmarried parents. 2010 form 1040 You, your 5-year-old son, and your son's father lived together all year. 2010 form 1040 You and your son's father are not married. 2010 form 1040 Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. 2010 form 1040 Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. 2010 form 1040 Neither of you had any other income. 2010 form 1040 Your son's father agrees to let you treat the child as a qualifying child. 2010 form 1040 This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. 2010 form 1040 Example 12—unmarried parents claim same child. 2010 form 1040 The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. 2010 form 1040 In this case, only your son's father will be allowed to treat your son as a qualifying child. 2010 form 1040 This is because his AGI, $14,000, is more than your AGI, $12,000. 2010 form 1040 You cannot claim the EIC (either with or without a qualifying child). 2010 form 1040 Example 13—child did not live with a parent. 2010 form 1040 You and your 7-year-old niece, your sister's child, lived with your mother all year. 2010 form 1040 You are 25 years old, and your AGI is $9,300. 2010 form 1040 Your only income was from a part-time job. 2010 form 1040 Your mother's AGI is $15,000. 2010 form 1040 Her only income was from her job. 2010 form 1040 Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. 2010 form 1040 Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. 2010 form 1040 However, only your mother can treat her as a qualifying child. 2010 form 1040 This is because your mother's AGI, $15,000, is more than your AGI, $9,300. 2010 form 1040 Special rule for divorced or separated parents (or parents who live apart). 2010 form 1040   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. 2010 form 1040 The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all time during the last 6 months of 2013, whether or not they are or were married. 2010 form 1040 The child received over half of his or her support for the year from the parents. 2010 form 1040 The child is in the custody of one or both parents for more than half of 2013. 2010 form 1040 Either of the following statements is true. 2010 form 1040 The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. 2010 form 1040 If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. 2010 form 1040 A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. 2010 form 1040 For details, see Publication 501. 2010 form 1040 Also see Applying Rule 9 to divorced or separated parents (or parents who live apart), next. 2010 form 1040 Applying Rule 9 to divorced or separated parents (or parents who live apart). 2010 form 1040   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. 2010 form 1040 However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. 2010 form 1040 If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. 2010 form 1040 Example 1. 2010 form 1040 You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. 2010 form 1040 Your AGI is $10,000. 2010 form 1040 Your mother’s AGI is $25,000. 2010 form 1040 Your son's father did not live with you or your son. 2010 form 1040 Under the Special rule for divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. 2010 form 1040 However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. 2010 form 1040 You and your mother did not have any child care expenses or dependent care benefits. 2010 form 1040 If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. 2010 form 1040 Example 2. 2010 form 1040 The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. 2010 form 1040 Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. 2010 form 1040 Example 3. 2010 form 1040 The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. 2010 form 1040 Your mother also claims him as a qualifying child for head of household filing status. 2010 form 1040 You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. 2010 form 1040 The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. 2010 form 1040 Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 2010 form 1040 ) if all of the following statements are true. 2010 form 1040 You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 2010 form 1040 Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. 2010 form 1040 You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 2010 form 1040 You lived with that person in the United States for more than half of the year. 2010 form 1040 You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 2010 form 1040 For more details about the tests to be a qualifying child, see Rule 8. 2010 form 1040 If you are a qualifying child of another taxpayer, you cannot claim the EIC. 2010 form 1040 This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 2010 form 1040 Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). 2010 form 1040 Example. 2010 form 1040 You and your daughter lived with your mother all year. 2010 form 1040 You are 22 years old, unmarried, and attended a trade school full time. 2010 form 1040 You had a part-time job and earned $5,700. 2010 form 1040 You had no other income. 2010 form 1040 Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. 2010 form 1040 She can claim the EIC if she meets all the other requirements. 2010 form 1040 Because you are your mother's qualifying child, you cannot claim the EIC. 2010 form 1040 This is so even if your mother cannot or does not claim the EIC. 2010 form 1040 Child of person not required to file a return. 2010 form 1040   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you met the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 2010 form 1040 Example 1—return not required. 2010 form 1040 The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 2010 form 1040 As a result, you are not your mother's qualifying child. 2010 form 1040 You can claim the EIC if you meet all the other requirements to do so. 2010 form 1040 Example 2—return filed to get refund of tax withheld. 2010 form 1040 The facts are the same as in Example 1 except your mother had wages of $1,500 and had income tax withheld from her wages. 2010 form 1040 She files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. 2010 form 1040 As a result, you are not your mother's qualifying child. 2010 form 1040 You can claim the EIC if you meet all the other requirements to do so. 2010 form 1040 Example 3—return filed to get EIC. 2010 form 1040 The facts are the same as in Example 2 except your mother claimed the EIC on her return. 2010 form 1040 Since she filed the return to get the EIC, she is not filing it only to get a refund of income tax withheld. 2010 form 1040 As a result, you are your mother's qualifying child. 2010 form 1040 You cannot claim the EIC. 2010 form 1040 Chapter 3—Rules If You Do Not Have a Qualifying Child Use this chapter if you do not have a qualifying child and have met all the rules in chapter 1. 2010 form 1040 This chapter discusses Rules 11 through 14. 2010 form 1040 You must meet all four of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit without a qualifying child. 2010 form 1040 You can file Form 1040, Form 1040A, or Form 1040EZ to claim the EIC without a qualifying child. 2010 form 1040 If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. 2010 form 1040 If you have a qualifying child. 2010 form 1040   If you meet Rule 8, you have a qualifying child. 2010 form 1040 If you meet Rule 8 and do not claim the EIC with a qualifying child, you cannot claim the EIC without a qualifying child. 2010 form 1040 Rule 11—You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. 2010 form 1040 If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. 2010 form 1040 It does not matter which spouse meets the age test, as long as one of the spouses does. 2010 form 1040 You meet the age test if you were born after December 31, 1948, and before January 2, 1989. 2010 form 1040 If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. 2010 form 1040 If neither you nor your spouse meets the age test, you cannot claim the EIC. 2010 form 1040 Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2010 form 1040 Death of spouse. 2010 form 1040   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. 2010 form 1040 Example 1. 2010 form 1040 You are age 28 and unmarried. 2010 form 1040 You meet the age test. 2010 form 1040 Example 2—spouse meets age test. 2010 form 1040 You are married and filing a joint return. 2010 form 1040 You are age 23 and your spouse is age 27. 2010 form 1040 You meet the age test because your spouse is at least age 25 but under age 65. 2010 form 1040 Example 3—spouse dies in 2013. 2010 form 1040 You are married and filing a joint return with your spouse who died in August 2013. 2010 form 1040 You are age 67. 2010 form 1040 Your spouse would have become age 65 in November 2013. 2010 form 1040 Because your spouse was under age 65 when she died, you meet the age test. 2010 form 1040 Rule 12—You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. 2010 form 1040 If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. 2010 form 1040 If you are not sure whether someone else can claim you as a dependent, get Publication 501 and read the rules for claiming a dependent. 2010 form 1040 If someone else can claim you as a dependent on his or her return, but does not, you still cannot claim the credit. 2010 form 1040 Example 1. 2010 form 1040 In 2013, you were age 25, single, and living at home with your parents. 2010 form 1040 You worked and were not a student. 2010 form 1040 You earned $7,500. 2010 form 1040 Your parents cannot claim you as a dependent. 2010 form 1040 When you file your return, you claim an exemption for yourself by not checking the You box on line 5 of your Form 1040EZ and by entering $10,000 on that line. 2010 form 1040 You meet this rule. 2010 form 1040 You can claim the EIC if you meet all the other requirements. 2010 form 1040 Example 2. 2010 form 1040 The facts are the same as in Example 1, except that you earned $2,000. 2010 form 1040 Your parents can claim you as a dependent but decide not to. 2010 form 1040 You do not meet this rule. 2010 form 1040 You cannot claim the credit because your parents could have claimed you as a dependent. 2010 form 1040 Joint returns. 2010 form 1040   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. 2010 form 1040   However, another person may be able to claim you as a dependent if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. 2010 form 1040 But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. 2010 form 1040 Example 1—return filed to get refund of tax withheld. 2010 form 1040 You are 26 years old. 2010 form 1040 You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. 2010 form 1040 Neither you nor your wife is required to file a tax return. 2010 form 1040 You do not have a child. 2010 form 1040 Taxes were taken out of your pay so you file a joint return only to get a refund of the withheld taxes. 2010 form 1040 Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. 2010 form 1040 They can claim exemptions for you and your wife if all the other tests to do so are met. 2010 form 1040 Example 2—return filed to get EIC. 2010 form 1040 The facts are the same as in Example 1except no taxes were taken out of your pay. 2010 form 1040 Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. 2010 form 1040 Because claiming the EIC is your reason for filing the return, you are not filing it only to claim a refund of income tax withheld or estimated tax paid. 2010 form 1040 Your parents cannot claim an exemption for either you or your wife. 2010 form 1040 Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 2010 form 1040 ) if all of the following statements are true. 2010 form 1040 You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 2010 form 1040 Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. 2010 form 1040 You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 2010 form 1040 You lived with that person in the United States for more than half of the year. 2010 form 1040 You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 2010 form 1040 For more details about the tests to be a qualifying child, see Rule 8. 2010 form 1040 If you are a qualifying child of another taxpayer, you cannot claim the EIC. 2010 form 1040 This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 2010 form 1040 Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2010 form 1040 Example. 2010 form 1040 You lived with your mother all year. 2010 form 1040 You are age 26, unmarried, and permanently and totally disabled. 2010 form 1040 Your only income was from a community center where you went three days a week to answer telephones. 2010 form 1040 You earned $5,000 for the year and provided more than half of your own support. 2010 form 1040 Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. 2010 form 1040 She can claim the EIC if she meets all the other requirements. 2010 form 1040 Because you are a qualifying child of your mother, you cannot claim the EIC. 2010 form 1040 This is so even if your mother cannot or does not claim the EIC. 2010 form 1040 Joint returns. 2010 form 1040   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. 2010 form 1040   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. 2010 form 1040 But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. 2010 form 1040 Child of person not required to file a return. 2010 form 1040   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 2010 form 1040 Example 1—return not required. 2010 form 1040 You lived all year with your father. 2010 form 1040 You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. 2010 form 1040 You have no other income, no children, and provided more than half of your own support. 2010 form 1040 Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 2010 form 1040 As a result, you are not your father's qualifying child. 2010 form 1040 You can claim the EIC if you meet all the other requirements to do so. 2010 form 1040 Example 2—return filed to get refund of tax withheld. 2010 form 1040 The facts are the same as in Example 1 except your father had wages of $1,500 and had income tax withheld from his wages. 2010 form 1040 He files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. 2010 form 1040 As a result, you are not your father's qualifying child. 2010 form 1040 You can claim the EIC if you meet all the other requirements to do so. 2010 form 1040 Example 3—return filed to get EIC. 2010 form 1040 The facts are the same as in Example 2 except your father claimed the EIC on his return. 2010 form 1040 Since he filed the return to get the EIC, he is not filing it only to get a refund of income tax withheld. 2010 form 1040 As a result, you are your father's qualifying child. 2010 form 1040 You cannot claim the EIC. 2010 form 1040 Rule 14—You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. 2010 form 1040 If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2010 form 1040 United States. 2010 form 1040   This means the 50 states and the District of Columbia. 2010 form 1040 It does not include Puerto Rico or U. 2010 form 1040 S. 2010 form 1040 possessions such as Guam. 2010 form 1040 Homeless shelter. 2010 form 1040   Your home can be any location where you regularly live. 2010 form 1040 You do not need a traditional home. 2010 form 1040 If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. 2010 form 1040 Military personnel stationed outside the United States. 2010 form 1040   U. 2010 form 1040 S. 2010 form 1040 military personnel stationed outside the United States on extended active duty (defined in chapter 2) are considered to live in the United States during that duty period for purposes of the EIC. 2010 form 1040 Chapter 4—Figuring and Claiming the EIC You must meet one more rule to claim the EIC. 2010 form 1040 You need to know the amount of your earned income to see if you meet the rule in this chapter. 2010 form 1040 You also need to know that amount to figure your EIC. 2010 form 1040 Rule 15—Earned Income Limits Your earned income must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 2010 form 1040 Earned Income Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. 2010 form 1040 Employee pay is earned income only if it is taxable. 2010 form 1040 Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 2010 form 1040 But there is an exception for nontaxable combat pay, which you can choose to include in earned income. 2010 form 1040 Earned income is explained in detail in Rule 7 in chapter 1. 2010 form 1040 Figuring earned income. 2010 form 1040   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. 2010 form 1040   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. 2010 form 1040   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). 2010 form 1040 You will then reduce that amount by any amount included on that line and described in the following list. 2010 form 1040 Scholarship or fellowship grants not reported on a Form W-2. 2010 form 1040 A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. 2010 form 1040 Inmate's income. 2010 form 1040 Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. 2010 form 1040 This includes amounts received for work performed while in a work release program or while in a halfway house. 2010 form 1040 If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 2010 form 1040 Pension or annuity from deferred compensation plans. 2010 form 1040 A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. 2010 form 1040 If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 2010 form 1040 This amount may be reported in box 11 of your Form W-2. 2010 form 1040 If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or an annuity. 2010 form 1040 Clergy. 2010 form 1040   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also re