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Publication 596 2001 Tax Year

Rule 14. Your Total Earned Income Must Be Less Than:

  • $32,121 if you have more than one qualifying child,
  • $28,281 if you have one qualifying child, or
  • $10,710 if you do not have a qualifying child.

Earned income is explained in Rule 6 in chapter 1 and some examples are shown in Table 3, below. You figure your total earned income by adding together your taxable earned income and your nontaxable earned income. You can use Worksheet 2 shown on the next page.

However, if you are self-employed, a statutory employee, or a church employee who files Schedule SE (Form 1040), you will not know your total earned income until you fill out Part 4 of EIC Worksheet B on page 30.

Church employee. In this publication, this term means an employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes.

Table 3. Examples of Taxable and Nontaxable Earned Income

Taxable Earned Income Nontaxable Earned Income
Wages and salaries Salary deferrals and reductions
Union strike benefits Meals and lodging provided for the convenience of your employer
Taxable long-term disability benefits received before minimum retirement age Excludable dependent care benefits and excludable adoption benefits
Net earnings from self-employment Excludable educational assistance benefits
Tips Excluded combat pay
Gross income received as a statutory employee Military basic housing and subsistence allowances

Worksheet 2: Earned Income

Note. Do not include on this worksheet any net earnings from self-employment or any income you received as a statutory employee. Instead, enter those amounts on EIC Worksheet B (page 30).
Taxable Earned Income
 1. Enter the amount from line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ).      1.
 2. If you received a taxable scholarship or fellowship grant that was not reported to you on a Form W-2 but was included in the total on line 7 (Form 1040 or 1040A) or line 1 (Form 1040EZ), enter the amount.  2.    
 3. Inmates. 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), enter that amount.  3.    
 4. Clergy. 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 reported on line 7 (Form 1040), enter that amount.  4.    
 5. Church employees. If you received wages as a church employee (as defined on page 20), enter any amount you included on both line 5a of Schedule SE and line 7 (Form 1040).  5.    
 6. If you received a pension or annuity from a nonqualified deferred compensation plan or a section 457 plan and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), enter the amount. (This amount may be reported in box 11 of your Form W-2. If you received such an amount but box 11 is blank, contact your employer for the amount of the pension or annuity.)  6.    
 7. Add the amounts on lines 2, 3, 4, 5, and 6 of this worksheet.      7.
 8. Subtract line 7 of this worksheet from line 1. This is your taxable earned income.      8.
Nontaxable Earned Income
 9. Enter the amount of any salary deferrals and reductions.  9.    
10. Enter the value of any meals and lodging that were nontaxable because they were provided for the convenience of your employer. (Do not include any amount included on line 2 of Schedule SE.)  10.    
11. Enter the total of any other nontaxable amounts you received from your employer for work you performed. (Do not include disability insurance payments for which you paid the premiums or any item listed under Income That Is Not Earned Income on page 10. If you are a member of the clergy, do not include any housing allowance or the rental value of a parsonage unless it does not have to be included on line 2 of Schedule SE.) 11.    
12. Add the amounts on lines 9, 10, and 11 of this worksheet. This is your nontaxable earned income. Enter this amount on the correct line for your tax return. (This is line 61b (Form 1040), line 39b (Form 1040A), or line 9b (Form 1040EZ).)     12.
Total Earned Income
13. Add the amounts on lines 8 and 12 of this worksheet. This is your total earned income. (If you fill out EIC Worksheet A, enter this amount on line 1 of that worksheet.) 13.
 

Your total earned income must be less than:

  • $32,121 if you have more than one qualifying child,
  • $28,281 if you have one qualifying child, or
  • $10,710 if you do not have a qualifying child.

If your total earned income is too great, you cannot claim the EIC. Put "No" directly to the right of line 61a (Form 1040) or line 39a (Form 1040A), or on line 9b (Form 1040EZ). You do not need to read the rest of this publication. You can go back and finish the rest of your tax return.

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