Contributed by AnthonyS FreeTaxUSA Agent Tax Pro
💡Disclaimer: FreeTaxUSA Software DOES NOT currently support this filing situation.
“I spent part of last year in a work-release program — can I still get the Earned Income Tax Credit?” This is a common question for those who were incarcerated or in transitional programs like halfway houses or work-release. Eligibility depends on when and where your income was earned— as not all wages are considered earned income for claiming the Earned Income Tax Credit (EITC). You should receive a Form W-2 or a Form 1099-NEC for income earned while in prison from a correctional facility or work release program.
Am I eligible for the EITC?
According to the IRS, income earned while incarcerated — whether in prison, jail, halfway house, or through a work-release program — is not considered earned income for the purposes of calculating either EITC or the Additional Child Tax Credit (ACTC). For more details see IRS Publication 596, Earned Income Credit.
What if I was incarcerated for the entire tax year?
You qualify for the EITC if all the following are true:
- Your spouse wasn’t incarcerated during the year
- You’re filing a joint return with your spouse
- Your combined earned income meets the EITC eligibility thresholds
If you meet all three of these qualifications, the EITC is calculated only on your spouse’s qualifying earned income.
What if I was incarcerated for part of the year?
If you were incarcerated for only part of the tax year, you may still qualify for the EITC. However:
- Wages earned while incarcerated must be excluded.
- Only income earned outside of incarceration (before or after your time in custody) may count.
Be sure to separate penal income from other wages when calculating your EITC.
Do EITC income limits include penal income?
Even though penal income may appear on your tax return, it isn’t considered earned income when determining if you qualify for the EITC. This also means if your combined income (including income earned while incarcerated) appears too high to qualify, you might still be eligible once this income is removed from the calculation.
Example: If you earned $12,000 while incarcerated and your spouse earned $25,000, your total AGI might be $37,000. But since income earned while incarcerated is excluded from EITC calculations, only $25,000 is considered earned income— which may keep you under the qualifying income threshold.
Conclusion
FreeTaxUSA doesn’t support filing for the EITC in situations where income earned while incarcerated is included. You may need additional help from a licensed tax professional or use a different retail tax service.