Volunteer Income Tax Assistance (VITA) Certification Practice Test

Would receiving $2,100 in investment income prevent a taxpayer from being eligible for the EIC?

1. Yes

2. No

The correct answer is: No

A taxpayer's eligibility for the Earned Income Credit (EIC) is generally determined by their earned income and other qualifications rather than by investment income alone. For the tax year 2023, to qualify for the EIC, a taxpayer must have earned income—such as wages or self-employment income—and must meet certain criteria concerning adjusted gross income (AGI) and investment income limits. As of 2023, if a taxpayer's investment income exceeds $11,000, they would not qualify for the EIC. However, receiving $2,100 in investment income is below this threshold, meaning that it would not disqualify the taxpayer from receiving the credit. Thus, as long as the taxpayer meets other qualifications for the EIC, such as having earned income within the specified limits and meeting filing status requirements, they can still be eligible for the credit. The presence of investment income does not inherently disqualify a taxpayer from earning the credit unless it exceeds the stipulated limits.