2018 Instructions for Form FTB 3514 California Earned Income Tax Credit Revised: 04/2021

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 2015, and to the California Revenue and Taxation Code (R&TC).

What's New

Age Limit for Eligible Individuals

For taxable years beginning on or after January 1, 2018, the age limit for an eligible individual without a qualifying child is revised to 18 years or older.

General Information

In general, for taxable years beginning on or after January 1, 2015, California law conforms to the IRC as of January 1, 2015. However, there are continuing differences between California and federal law. When California conforms to federal tax law changes, we do not always adopt all of the changes made at the federal level. For more information, go to ftb.ca.gov² and search for conformity. Additional information can be found in FTB Pub. 1001, Supplemental Guidelines to California Adjustments, the instructions for California Schedule CA (540 or 540NR), and the Business Entity tax booklets.

The instructions provided with California tax forms are a summary of California tax law and are only intended to aid taxpayers in preparing their state income tax returns. We include information that is most useful to the greatest number of taxpayers in the limited space available. It is not possible to include all requirements of the California Revenue and Taxation Code (R&TC) in the instructions. Taxpayers should not consider the instructions as authoritative law.

Registered Domestic Partners (RDPs)

For purposes of California income tax, references to a spouse, husband, or wife also refer to a California RDP, unless otherwise specified. When we use the initials RDP they refer to both a California registered domestic “partner” and a California registered domestic “partnership,” as applicable. For more information on RDPs, get FTB Pub. 737, Tax Information for Registered Domestic Partners.

The refundable EITC is available to taxpayers who earned wage income subject to California withholding and/or have net earnings from self-employment. This credit is similar to the federal Earned Income Credit (EIC) but with different income limitations. EITC reduces your California tax obligation, or allows a refund if no California tax is due. You do not need a child to qualify, but must file a California tax return to claim the credit and attach a completed form FTB 3514, California Earned Income Tax Credit.

A. Purpose

Use form FTB 3514 to determine whether you qualify to claim the credit, provide information about your qualifying children, if applicable, and to figure the amount of your credit.

B. Differences in California and Federal Law

The differences between California and federal law are as follows:

• California allows this credit for wage income (wages, salaries, tips and other employee compensation) that is subject to California withholding.
• If you were a nonresident, you must have earned wage income that is subject to California withholding.
• Both your earned income and federal adjusted gross income (AGI) must be less than $54,884 to qualify for the federal credit, and less than $24,951 to qualify for the California credit.
• An eligible individual without a qualifying child is 18 years or older for the California credit.
• You may elect to include all of your (and/or all of your spouse/RDP’s if filing jointly) nontaxable military combat pay in earned income for California purposes, whether or not you elect to include it for federal purposes. Get FTB Pub. 1032, Tax Information for Military Personnel, for special rules that apply to military personnel claiming the EITC.

Specific Instructions

If certain requirements are met, you may claim the EITC even if you do not have a qualifying child. The amount of the credit is greater if you have a qualifying child, and increases with each child that qualifies, up to a maximum of three children. Follow Step 1 through Step 7 below to determine if you qualify for the credit and to figure the amount of the credit.

If your EITC was reduced or disallowed for any reason other than a math or clerical error and you now want to take the EITC then answer yes on line 1b within the form and follow Step 1 through Step 7 below to determine if you qualify for the credit.

Attach the completed form FTB 3514 to your Form 540 or 540 2EZ, California Resident Income Tax Return; or Long or Short Form 540NR, California Nonresident or Part-Year Resident Income Tax Return, if you claim the California EITC.

Step 1 Qualifications for All Filers

1. Federal AGI
   If, in taxable year 2018:
   • 1 or more qualifying children lived with you, is the amount on federal Form 1040, line 7 less than $24,951?
   • No qualifying children lived with you, is the amount on federal Form 1040, line 7 less than $16,751?
   • Yes Continue.
   • No Stop here, you cannot take the credit.
2. Do you, and your spouse/RDP if filing a joint return, have a social security number (SSN) that allows you to work and is valid for EITC purposes? See "Valid SSN" section within Step 3, Qualifying Child, for a full definition.
   • Yes Continue.
   • No Stop here, you cannot take the credit.
3. Is your filing status married filing separately?
   • Yes Stop here, you cannot take the credit.
   • No Continue.
4. Are you filing federal Forms 2555, Foreign Earned Income or 2555-EZ, Foreign Earned Income Exclusion (relating to foreign earned income)?
   • Yes Stop here, you cannot take the credit.
   • No Continue.
5. Were you or your spouse/RDP a nonresident alien for any part of 2018?
   • Yes If your filing status is married filing jointly, continue. Otherwise, stop; you cannot take the EITC.
   • No Continue.
6. If you are filing a Long or Short Form 540NR, did you and your spouse/RDP live in California for at least 183 days?
   • Yes Continue.
   • No Stop here, you cannot take the credit.
7. Complete line 1, line 2, and line 3 on the form. Then go to Step 2.

Step 2 Investment Income

If you are filing Form 540 or Long Form 540NR complete Worksheet 1. If you are filing Form 540 2EZ or Short Form 540NR complete Worksheet 2.

Worksheet 1 – Investment Income Form 540 and Long Form 540NR Filers

Interest and Dividends

1. Add and enter the amounts from federal Form 1040, line 2a and line 2b.
2. Enter the amount from federal Form 8814, Parents’ Election to Report Child’s Interest and Dividends, line 1b.
3. Enter the amount from federal Form 1040, line 3b.
4. Enter any amounts from federal Form 8814, line 12 for child's interest and dividends.

Capital Gain Net Income

5. Enter the amount from federal Schedule 1 (Form 1040), line 13. If the result is less than zero, enter -0-.
6. Enter the gain from federal Form 4797 Sales of Business Property, line 7. If the amount on that line is a loss, enter -0-. (But, if you completed federal Form 4797, line 8 and line 9, enter the amount from line 9 instead).
7. Subtract line 6 from line 5. (If the result is less than zero, enter -0-).

Passive Activities

8. Enter the total of net income from passive activities included on federal Schedule 1 (Form 1040), line 17.

Other Activities

9. Enter any income from the rental of personal property included on federal Schedule 1 (Form 1040), line 21. If the result is zero or less, enter -0-.
10. Enter any expenses related to the rental of personal property included as a write‑in adjustment on federal Schedule 1 (Form 1040), line 36.
11. Subtract line 10 from line 9. (If the result is less than zero, enter -0-).

Investment Income

12. Add the amounts on lines 1, 2, 3, 4, 7, 8, and 11.
    Enter the total.
    This is your investment income.
13. Is the amount on line 12 more than $3,699?
    • Yes Stop here, you cannot take the credit.
    • No Enter the amount from line 12 on form FTB 3514, line 4. Go to Step 3.

Worksheet 2 – Investment Income Form 540 2EZ and Short Form 540NR Filers

1. Taxable interest. Enter the amount from Form 540 2EZ, line 10. Short Form 540NR filers add and enter the amounts from federal Form 1099-INT, box 1.
2. Nontaxable interest. Add and enter the amounts from federal Form 1099-INT, box 3 and box 8, and the amount from federal Form 1099-DIV, box 10.
3. Dividends. Enter the amount from Form 540 2EZ, line 11.
4. Capital gain net income. Enter the amount from Form 540 2EZ, line 13.
5. Investment Income. Add line 1, line 2, line 3 and line 4. Enter the amount here.
6. Is the amount on line 5 more than $3,699?
   • Yes. Stop here, you cannot take the credit.
   • No. Enter the amount from line 5 on form FTB 3514, line 4.
     Go to Step 3.

Step 3 Qualifying Child

Qualifying Child Definition

A qualifying child for the EITC is a child who meets the following conditions:

• Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew).
• Is under age 19 at the end of 2018 and younger than you (or your spouse/RDP, if filing jointly), or under age 24 at the end of 2018, a student, and younger than you (or your spouse/RDP, if filing jointly), or any age and permanently and totally disabled.
• Is not filing a joint return for 2018 or is filing a joint return for 2018 only to claim a refund of withheld income tax or estimated tax paid. Get federal Publication 596, Earned Income Credit, for examples.
• Lived with you in California for more than half of 2018. If the child did not live with you for the required time, see exceptions in the instructions for line 11.

  Note. If the child was married or meets the conditions to be a qualifying child of another person (other than your spouse/RDP if filing a joint return), special rules apply. Get federal Publication 596 for more information.

Qualifying Child Questionnaire

1. Do you have at least one child who meets the conditions to be your qualifying child?
   • Yes Continue.
   • No Go to Step 4.
2. Are you filing a joint return for 2018?
   • Yes Complete form FTB 3514, Part III, line 5 through line 12. Go to Step 5.
   • No Continue.
3. Could you be a qualifying child of another person for 2018? (Answer “No” if the other person is not required to file, and is not filing, a 2018 tax return or is filing a 2018 return only to claim a refund of withheld income tax or estimated tax paid. Get federal Publication 596 for examples.)
   • Yes Stop here, you cannot take the credit.
   • No Complete form FTB 3514, Part III, line 5 through line 12. Go to Step 5.

Line 7 – SSN

The child must have a valid SSN, as defined below, unless the child was born and died in 2018. If your child was born alive and died in 2018 and did not have an SSN, enter “Died” on this line and attach a copy of the child’s birth certificate, death certificate, or hospital medical records or include it according to your software's instructions.

Valid SSN. For the EITC, a valid SSN is a number issued by the Social Security Administration unless “Not Valid for Employment” is printed on the social security card and the number was issued solely to allow the recipient of the SSN to apply for or receive a federally funded benefit. However, if “Valid for Work Only With DHS Authorization” is printed on the social security card, the SSN is valid for EITC purposes only as long as the DHS authorization is still valid.

An Individual Taxpayer Identification Number (ITIN) or Adoption Taxpayer Identification Number (ATIN) cannot be used to claim EITC. If you or your child has an ITIN or ATIN and later gets a SSN that is valid for employment, you may be able to file an amended return.

If you did not have an SSN by the due date of your 2018 return (including extensions), you cannot claim the EITC on either your original or an amended 2018 return, even if you later get an SSN. Also, if a child did not have an SSN by the due date of your return (including extensions), you cannot count that child as a qualifying child in figuring the EITC on either your original or an amended 2018 return, even if that child later gets an SSN.

Use Forms 540, 540 2EZ, or 540NR (Long or Short) amended individual tax returns to correct your return.

Line 9a – Student

A student is a child who during any part of 5 calendar months of 2018 was enrolled as a full-time student at a school, or took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.

Line 9b – Permanently and totally disabled

A person is permanently and totally disabled if, at any time in 2018, the person could not engage in any substantial gainful activity because of a physical or mental condition and a doctor has determined that this condition (a) has lasted or can be expected to last continuously for at least a year, or (b) can be expected to lead to death.

Line 10 – Child's relationship to you

For additional information see qualifying child definition.

Line 11 – Number of days child lived with you

Enter the number of days the child lived with you in California during 2018. To qualify, the child must have the same principal place of residence in California as you for more than half of 2018, defined as 183 days or more. If the child was born or died in 2018 and your home was the child’s home for more than half the time he or she was alive during 2018, enter "365." Do not enter more than 365 days. If the child did not live with you for the required time, temporary absences may count as time lived at home. For more information get federal Publication 596.

Line 12 – Child’s physical address

Enter the physical address where the child resided during 2018. This should be the address of the principal place of residence in California where the child lived with you for more than half of 2018. If the child lived with you in California for more than half of 2018, but moved within California during this period, this should be the address of the principal place of residence that was shared the longest.

Step 4 Filer Without a Qualifying Child

1. Is the amount on federal Form 1040, line 7 less than $16,751?
   • Yes Continue.
   • No Stop here, you cannot take the credit.
2. Were you (or your spouse/RDP if filing a joint return) at least age 18 at the end of 2018? (Answer “Yes” if you, or your spouse/RDP if filing a joint return, were born on or before January 1, 2001.) If your spouse/RDP died in 2018 (or if you are preparing a return for someone who died in 2018), get federal Publication 596 for more information before you answer.
   • Yes Continue.
   • No Stop here, you cannot take the credit.
3. Was your main home, and your spouse’s/RDP's if filing a joint return, in California for more than half of 2018?
   • Yes Continue.
   • No Stop here, you cannot take the credit.
4. Are you filing a joint return for 2018? For more information get federal Publication 596.
   • Yes Skip questions e and f; go to Step 5.
   • No Continue.
5. Could you be a qualifying child of another person for 2018? (Answer “No” if the other person is not required to file, and is not filing, a 2018 tax return or is filing a 2018 return only to claim a refund of withheld income tax or estimated tax paid. Get federal Publication 596 for examples.)
   • Yes Stop here, you cannot take the credit.
   • No Continue.
6. Can you be claimed as a dependent on someone else’s 2018 tax return?
   • Yes Stop here, you cannot take the credit.
   • No Go to Step 5.

Step 5 California Earned Income

Complete lines 13 through 19 to figure your California earned income.

Line 13 – Wages, salaries, tips, and other employee compensation, subject to California withholding

Enter the amount from Form 540, line 12; Form 540 2EZ, line 9; Long Form 540NR, line 12; or Short Form 540NR, line 12. Include all of your Medicaid waiver payments or In Home Supportive Services (IHSS) payments that are nontaxable for federal purposes.

Note: If you have clergy wages, subtract the self employment tax, if any, that was reported on federal Schedule SE and enter the result on form FTB 3514, line 13.

Line 14 – IHSS payments

You may elect to include or exclude your Medicaid waiver payments or IHSS payments that are nontaxable for federal purposes. If you elect to exclude such payments from your earned income for California EITC purposes, enter the amount you received as Medicaid waiver payments or IHSS payments that are nontaxable for federal purposes on line 14. If you elect to include such payments, leave line 14 blank. If you are filing a joint return, both you and/or your spouse/RDP can elect to include or exclude your own nontaxable Medicaid waiver payments or IHSS payments for California EITC purposes. Each must elect to include or exclude all such payments, not just a portion of it. You may elect to include or exclude such payments from earned income for California EITC purposes, whether or not you elect to include or exclude them for federal purposes.

Line 15 – Prison inmate wages and/or pension or annuity from a nonqualified deferred compensation plan or a nongovernmental Section 457 plan

Enter the amount included on line 13, that you received for work performed while an inmate in a penal institution.

Enter the amount included on line 13, that you received as a pension or annuity from a nonqualified deferred compensation plan or a nongovernmental IRC Section 457 plan. This amount may be shown on federal Form W-2, Wage and Tax Statement, box 11. If you received such an amount and box 11 is blank, contact your employer for the amount received as a pension or annuity.

Line 17 – Nontaxable combat pay

Enter the amount from federal Form W-2, box 12, code Q, if you elect to include your nontaxable military combat pay in earned income for EITC purposes. If you are filing a joint return, both you and/or your spouse/RDP can elect to include your own nontaxable military combat pay for EITC purposes. Each must include all of their nontaxable military combat pay, not just a portion of it. You may elect to include nontaxable military combat pay in earned income for California purposes, whether or not you elect to include it for federal purposes.

Line 18 – Business income or (loss)

If you are self-employed and have net earnings from self-employment, go to Worksheet 3 to figure your business income or loss. Attach a copy of your complete federal return, including any Schedule C, Schedule C-EZ, Schedule F, Schedule SE, and any Schedule K-1(Form 1065).

Worksheet 3 – Business Income or (Loss)

1. Business income or (loss). Enter the amount from federal Schedule 1 (Form 1040), line 12.
2. Farm income or (loss). Enter the amount from federal Schedule 1 (Form 1040), line 18.
3. Self-employment earnings from partnerships reported on K-1s. Enter the net profit (or loss) from federal Schedule K-1 (Form 1065), box 14, code A.
4. Deductible part of self-employment tax. Enter the amount from federal Schedule 1 (Form 1040), line 27.
5. Total business income or (loss). Add line 1, line 2, line 3, and subtract line 4. Enter the amount here and on form FTB 3514, line 18.

After completing Step 5, line 18e go to Step 6.

Lines 18 a-e Business information

Enter your business information in the spaces provided. If you have multiple businesses, use the information from the schedule with the largest net profit (loss).

Line b – Business address

Enter your business address. Show a street address instead of a box number. Include the suite or room number, if any.

Line c – Business license number

Enter your business license number. A business license number is a reference number from a county, city, or state that allows you to engage in a specific business activity within the designated area. If you do not have a business license number, leave line c blank.

Line d – SEIN

Enter your state employer identification number (SEIN) issued by the California Employment Development Department. If you do not have a SEIN, leave line d blank.

Line e – Business code

Use the six-digit code from federal Schedule C, Schedule C-EZ, or Schedule F, box B.

Step 6 How to Figure the CA EITC

Complete the California Earned Income Tax Credit Worksheet below. If you file a Form 540NR, go to Step 7 after you complete Step 6.

California Earned Income Tax Credit Worksheet

Part I – All Filers

1. Enter your California earned income from form FTB 3514, line 19. If the amount is zero or less, stop here.
2. Look up the amount on line 1 in the EITC Table to find the credit. Be sure you use the correct
   column for the number of qualifying children you have. Enter the credit here
   If the amount on line 2 is zero, stop here. You cannot take the credit.
3. Enter the amount from federal Form 1040, line 7.
4. Are the amounts on lines 1 and 3 the same?
   • Yes Skip line 5; and enter the amount from line 2 on line 6.
   • No Go to line 5.

Part II – Filers who Answered “No” on Line 4

5. If you have:
   • No qualifying children, is the amount on line 3 less than $3,580?
   • 1 qualifying child, is the amount on line 3 less than $5,376?
   • 2 qualifying children, is the amount on line 3 less than $7,547?
   • 3 or more qualifying children, is the amount on line 3 less than $7,547?
   • Yes Leave line 5 blank; enter the amount from line 2 on line 6.
   • No Look up the amount on line 3 in the EITC Table to find the credit. Be sure you use the correct
     column for the number of qualifying children you have. Enter the credit here.
     Look at the amounts on line 5 and line 2, enter the smaller amount on line 6.

Part III – Your Earned Income Tax Credit

6. This is your California earned income tax credit.
   Enter this amount on form FTB 3514, line 20.

Step 7 How to Figure the Nonresident or Part-Year Resident EITC

Line 22 – Nonresident or Part-Year Resident EITC

If you do not file a Form 540NR, do not complete lines 21 and 22 of form FTB 3514. If you file a Form 540NR, enter your CA Exemption Credit Percentage from line 38 of Form 540NR (Long or Short) on line 21 of form FTB 3514. Multiply line 21 by line 20 and enter the result on line 22 of form FTB 3514. This amount should also be entered on line 85 of Form 540NR (Long or Short).

2018 Earned Income Tax Credit Table

Caution: This is not a tax table. If you are married filing separately you do not qualify for this credit.

1. To find your credit, read down the “At least - But not over” columns and find the line that includes the amount you were told to look up from your California Earned Income Tax Credit Worksheet.
2. Then, go to the column that includes the number of qualifying children you have. Enter the credit from that column on your California Earned Income Tax Credit Worksheet.