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Earned income includes wages, salary, tips, commissions, jury duty pay, union strike benefits, certain disability pensions, U.S. military basic quarters and subsistence allowances, and net earnings from self‐employment (profit from your self‐employment activities). Military personnel can elect to treat tax‐free combat pay as earned income for purposes of the earned income credit.

TABLE 1.4 Earned Income Needed for Top Credit in 2021

	Earned Income Needed
Number of Qualifying Children	for Top Credit
No qualifying child	$ 9,820
1 qualifying child	10,640
2 or more qualifying children	14,950

Nontaxable employee compensation, such as tax‐free fringe benefits or salary deferrals—for example, contributions to company 401(k) plans—is not treated as earned income.

Earned income does not include pensions and retirement plan distributions, long‐term disability and military disability pensions, welfare, and Social Security benefits (for retirement or disability).

To qualify for the maximum credit, you must have earned income at or above a set amount. Table 1.4 shows the earned income you need to obtain the top credit (depending on the number of your qualifying children, if any).

For 2021, you may use your 2019 earned income to figure the credit if it was higher than your earned income in 2021.