EIC Eligibility Updates: What Do Tax Professionals Need to Know
As tax professionals prepare for the 2025 filing season, staying up to date on changes to the Earned Income Credit (EIC) is essential—not just for compliance, but for maximizing client refunds and minimizing audit risk. The IRS has issued several adjustments for tax year 2024 (filed in 2025), affecting income thresholds, credit amounts, and due diligence requirements.
Here’s what you need to know.
2025 EIC Income Limits and Maximum Credit
The IRS has adjusted the EIC parameters for inflation. Below are the key thresholds for tax year 2024 (filed in 2025):
|
Number of Qualifying Children |
Max AGI (Married Filing Jointly) |
Max Credit |
|
0 |
$24,210 |
$632 |
|
1 |
$53,120 |
$4,213 |
|
2 |
$59,478 |
$6,960 |
|
3 or more |
$63,398 |
$7,830 |
We recommended cross-reference these with Publication 596 and the official IRS Quick Reference Guide for accuracy.
EIC Eligibility Clarifications
The IRS continues to emphasize proper verification of qualifying children, including:
- SSNs must be valid for employment
- Children must meet relationship, age, and residency tests
- Special rules apply for non-custodial parents and married filing separately filers
New in Tax Year 2025:
- Clarified "main home" documentation expectations
- Expanded FAQ guidance for multi-generational households
Due Diligence and Form 8867 Updates
IRS penalties for EIC-related due diligence failures are now $600 per failure (up from $560 in TY2023). Form 8867 remains mandatory for returns claiming:
- EIC
- Child Tax Credit (CTC)
- American Opportunity Credit (AOTC)
- Head of Household status
New in 2025:
- IRS now requires documentation retention for all W-2s and 1099s used in EIC returns
- Enhanced audit flags for inconsistent self-employment income
Drake Tax Tip: Use the built-in Due Diligence Worksheet in Drake Tax to automatically check compliance and track supporting documents.
What Tax Preparers Should Do Now
- Train staff on the updated income thresholds and eligibility checks
- Update client intake forms to capture documentation needed for EIC compliance
- Use Drake Software’s EIC tools to ensure Form 8867 is properly completed
- Communicate with clients early—especially those with changing family or employment situations
References:
For more information about how Drake Software can help streamline EIC changes, please sign up for a Free Trial. Or, contact our sales team at 800.890.9500.
