Special Tax Provision for Determining Earned Income for Purposes of the Earned Income Tax Credit and Child Tax Credit

Special rules are available under the Disaster Tax Relief Act for qualified individuals eligible for the earned income tax credit and/or the child tax credit. Primarily this provision impacts taxpayers that reside in Florida, Georgia and Texas, but may impact certain residents of Louisiana, South Carolina and Puerto Rico.

Qualified individuals are taxpayers whose principle place of abode was in a disaster zone on the date the Hurricane Harvey, Irma or Maria occurred. Qualified individuals may determine the refundable portion of the child tax credit or the amount of the earned income tax credit based on the earned income in 2016 if the earned income in 2017 is less under the Disaster Tax Relief Act. Using higher earned income may allow a taxpayer to take a larger earned income tax credit and/or refundable child tax credit and thus receive a larger refund. This may be beneficial for qualified individuals who have less income in 2017, because they either had to miss work or take a leave of absence in 2017 due to the hurricanes.

We are still awaiting specific information from the IRS on how they want this reported on the 1040. Once this information becomes available we will post it on this blog and add it to the Pro Support Knowledgebase.