2025 Form 1040, Line 27
Earned Income Credit: Line 27's Refundable Boost
The §32 earned income credit on Line 27 rewards work: wages and net self-employment earnings earn the credit, 2025 investment income over $11,950 kills it entirely, and the credit is fully refundable — it pays out past zero into your refund.
Earned income in, investment income capped
Wages, salaries, tips, and net self-employment earnings count. Pensions, Social Security, unemployment, and investment income do not — and investment income is a cliff, not a slope: one dollar over the $11,950 cap for 2025 disqualifies the whole credit. A surprise capital gain has ended more EIC claims than any audit.
The credit curve: phase in, plateau, phase out
The credit rises with earnings, plateaus at a maximum that grows with each qualifying child, then phases out as AGI climbs past the limit for your filing status. Married joint filers get a wider phase-out band. No qualifying child? A smaller credit still exists for workers in the age window — check the tables before assuming you are out.
Disallowed? File Form 8862
If the IRS disallowed a prior-year EIC for anything beyond math error, you cannot just claim it again next year — you must file Form 8862 to re-establish eligibility. Reckless claims draw a two-year ban, fraud a ten-year one. For how refundable credits fit the payments side of the return, see chapter 4 of the Guide.
Questions, answered
- What counts as earned income for the EIC?
- Wages, salaries, tips, and net self-employment earnings. Pensions, Social Security, unemployment, and investment income do not count.
- What is the 2025 EIC investment income cap?
- $11,950. One dollar of investment income over that line disqualifies the entire credit for 2025.
- The IRS disallowed my EIC — how do I claim it again?
- File Form 8862 to re-establish eligibility. After a fraud finding the bar lasts longer, so read the disallowance notice before refiling.
Keep reading: Child Tax Credit · Refund or Owed · Schedule 3