IRS Increases Earned Income Tax Credit for Working Families, But Crypto Profits May Disqualify Recipients
The IRS has increased the amount of the Earned Income Tax Credit (EITC) in response to inflation. For the 2026 tax year, eligible individuals with one child can receive up to $4,427 and those with three or more children could get as much as $8,231. The EITC is a refundable credit designed for low- to moderate-income workers who file federal taxes. However, there's an important restriction: investment income—including capital gains from cryptocurrency—must not exceed $12,200 in 2026. If it does, the entire tax credit is lost. This rule applies even if a taxpayer’s salary remains within acceptable limits for eligibility. For example, someone earning $30,000 annually could lose their EITC entirely by making just over $12,200 in crypto gains. The IRS treats cryptocurrency as property, so trading or staking activities can trigger taxable events that impact the credit’s availability. Taxpayers must file Form 1040 (or 1040-SR) and Schedule EITC if claiming a qualifying child to receive their refund.
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Topics: capital gains crypto taxation Earned Income Tax Credit (EITC) IRS