Questions & Answers

What are the tie breaker rules for the Indiana Earned Income Credit and a qualifying child?

Qualifying child of more than one person
Sometimes a child meets the tests to be a qualifying child of more than one person. However, only one person can claim the Earned Income Credit (EIC) using that child. The paragraphs that follow will help you decide who can claim Indiana's EIC when more than one person has the same qualifying child.

Tiebreaker Rules
The following tiebreaker rules do not apply if the other person is your spouse and you file a joint return.

Important
For Indiana EIC purposes, you cannot claim a qualifying child of another person who has a higher modified AGI.

Which person can claim the EIC
If you and someone else have the same qualifying child, the person with the higher modified adjusted gross income (AGI) is the only one who may be able to claim Indiana's EIC using that child. The person with the lower modified AGI cannot use that child to claim the EIC. This is true even if the person with the higher modified AGI does not claim the EIC or meet all of the rules to claim the EIC. If the other person is your spouse and you file a joint return, this rule does not apply. If three or more persons have the same qualifying child, the person with the highest modified AGI is the only one who may be able to claim the EIC using that child.

For most people modified AGI is the same as federal AGI. See Chapter 3  of Indiana Publication EIC for more information on modified AGI. If your qualifying child meets the tests to be a qualifying child of both you and any other person and you have the higher modified AGI, you meet this rule. If you do not have the higher modified AGI, you cannot claim the qualifying child for Indiana EIC purposes.

Examples:
The following examples may help you in determining whether you can claim Indiana's EIC when you and someone else have the same qualifying child.

Example 1: You and your child lived with your parent.
You and your son lived with your mother all year. You are 25 years old. Your only income was $9,300 from a part-time job. Your mother's only income was $15,000 from her job. Initially, your son is a qualifying child of both you and your mother because he meets the age, joint federal return and residency tests for both you and your mother. However, because you both have the same qualifying child, only one of you can claim the child for Indiana EIC purposes. Because your mother's modified AGI ($15,000) is more than your modified AGI ($9,300), only your mother may be able to claim your son as a qualifying child for the Indiana EIC.

Example 2:
The facts are the same as in Example 1, but your mother had investment income of $3,900. Your mother cannot claim the EIC because her investment income is more than $3,500. Even though your mother cannot claim the EIC, you cannot claim your son as a qualifying child for Indiana EIC purposes because your mother's modified AGI is more than yours.

Examples 3 - 5: You and your child lived with another relative.

Example 3:
You and your sister shared a household for the entire year. You have three young children who lived in the household. Your sister does not have any children; however, she cares for your children as if they were her own. Your earned income is $15,000; your sister's earned income is $20,000. Neither of you had any other income. The children meet the age and residency tests for both you and your sister. They meet the relationship test for you because they are your children. They also meet the relationship test for your sister because they lived with her the whole year, she cared for them as if they were her own, and they are her sister's children. Therefore, they qualify as her eligible foster children. Your children are qualifying children of both you and your sister. However, because your sister's modified AGI is higher than yours, she is the only one who may claim them for Indiana EIC purposes.

Important
You and your sister cannot split the three qualifying children between you. You cannot claim the EIC even though your sister enters the names of only two of the children on her Schedule EIC. (Schedule IN-EIC has spaces for the names of only two qualifying children because the EIC is the same amount for two or more qualifying children.)

Example 4:
You, your spouse, and your 10-year-old son lived together until July 15 of the tax year, when your spouse moved out of the household. You and your spouse were divorced in November of the tax year. Your modified AGI is $16,000. Your former spouse's modified AGI is $18,000. Your son is a qualifying child of both you and your former spouse because your son lived with each of you for more than half the year and because he met the relationship and age tests for both of you. However, because your former spouse's modified AGI ($18,000) is more than your modified AGI ($16,000), your former spouse is the only one who may be able to claim the EIC for the tax year. You cannot claim the EIC for persons without a qualifying child because your modified AGI is more than $15,200.

Example 5:
You and your sister lived together all year. You have a 22-year-old son who lives with you, but is currently away from home attending college full time. Your sister has a 4-year-old daughter who lives with you and your sister. You care for your niece as you would your own child. Your modified AGI is $16,000. Your sister's modified AGI is $14,000. Both children meet the age and residency tests for both you and your sister. Your son meets the age test because he is under 24 and a full-time student. He meets the residency test because he is only temporarily away from home while attending college. Your niece meets the relationship test for both you and your sister. She meets the test for you as your eligible foster child because she is your sister's child, she lived with you all year, and you cared for her as your own child. Your son meets the relationship test for you but not for your sister because she does not care for him as her own child. Your son is a qualifying child for you but not for your sister. Your niece could be a qualifying child for both you and your sister. Because your modified AGI is higher than your sister's, only you can claim the EIC using your niece. You can claim the EIC for two children. If your sister's modified AGI were higher than yours, she could claim the EIC using your niece, and you could claim the credit using your son. This is so even though you and your sister have the same address and share the same household.

Example 6: You and your child lives with someone not related to you.
You, your 2-year-old son, and your son's father lived together all year. You and your son's father are not married. Your modified AGI is $18,000. Your son's father's modified AGI is $20,000. Your son is a qualifying child of both you and his father because he meets the relationship, age, and residency tests for both you and his father. Because the father's modified AGI was more than yours, only he may be able to claim your son for Indiana EIC purposes.

What if the person with the highest modified AGI cannot claim the EIC?
If you and someone else have the same qualifying child, and the other person has the higher modified AGI, then the child is the other person's qualifying child for Indiana's EIC purposes. You cannot treat the child as a qualifying child to claim Indiana's EIC even if the other person cannot claim Indiana's EIC.

Example:
You and your 8-year-old daughter moved in with your mother two years ago. You are not a qualifying child of your mother. Your daughter meets the conditions to be a qualifying child for both you and your mother. Your modified AGI for the tax year was $8,000, and your mother's was $54,000. Because your mother's modified AGI was higher, your daughter is your mother's qualifying child for Indiana EIC purposes. Since your mother's modified AGI is greater than $45,800, she is not eligible to claim Indiana's EIC. You cannot claim an Indiana EIC using your child as a qualifying child even though your mother cannot claim the credit.

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