Final answer:
The investment income threshold for claiming the Earned Income Credit for the 2022 tax year is $10,300. Exceeding this threshold will make a taxpayer ineligible for the EITC, which is a tax credit aimed at aiding low to moderate-income working individuals and families.
Step-by-step explanation:
If a taxpayer has investment income that exceeds a certain threshold, they are not eligible to claim the Earned Income Credit (EITC). For the tax year 2022, the threshold for investment income to claim the EITC is $10,300. This means that if a taxpayer's investment income is above this amount, they cannot claim the EITC. The EITC is a beneficial tax credit designed to help low to moderate-income working individuals and families, especially those with children. The credit not only reduces the amount of tax owed but may also result in a refund.
It is important to note that the EITC is subject to a phase-out, which means that as a taxpayer's income increases above a certain level, the credit amount they are eligible for gradually decreases until it reaches zero. This structure is to mitigate the effects of the poverty trap, ensuring that as people earn more, they do not lose all of their benefits immediately, thus encouraging work and reducing the disincentive to earn additional income.