Filing with schedule K-1 and 1099 income - Can I qualify for EITC as head of household?

Yes, you could qualify for the Earned Income Tax Credit based on your 1099 income! The EITC specifically looks at "earned income" which includes what you've made from consulting work reported on your 1099. Investment income (your K-1) is considered separately. For EITC purposes, your investment losses don't directly help you qualify, but they also don't count against your earned income calculation. The good news is that your 1099 income of $65K is considered earned income. With two qualifying children and filing as head of household, you might be eligible depending on your exact income level. There are income limits for EITC - for 2025 filing (2024 tax year), with two qualifying children, the income limit is higher than your $65K, so you're potentially in range. Your investment losses on the K-1 generally don't factor into the EITC calculation, which focuses primarily on earned income.

I was in a situation really similar to yours last year. I had some consulting income on 1099s and a bunch of investment stuff with some losses. I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out exactly how my different income sources affected my EITC eligibility. What I learned was that the system treats the K-1 and 1099 income completely differently. The website analyzed my tax documents and broke down exactly which parts of my income qualified for what. It was super helpful because the EITC rules get complicated when you have both investment and earned income. They even highlighted some deductions I could take as a self-employed consultant that ended up increasing my EITC amount!

Just wanted to follow up about my experience with taxr.ai after being skeptical. I decided to try it since my situation was similar with 1099s and investment losses. Holy crap, it literally saved me hours of confusion! I uploaded my documents and it immediately identified that my K-1 losses wouldn't count against the EITC investment income limit in my case because of how I was involved in the business. The tool explained that I was under the investment income threshold for EITC and that my 1099 income qualified as earned income. It even showed me exactly where on my tax forms these calculations were happening. Ended up qualifying for about $3,800 in EITC that I wasn't sure I'd get. Definitely worth checking out if you're confused about mixed income sources like this.

If you're trying to figure out EITC eligibility before your tax appointment, you might want to try getting clarification directly from the IRS. I spent WEEKS trying to get someone on the phone about this exact issue - K-1 losses and 1099 income for EITC. Impossible to get through. Then I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - it's a service that basically waits on hold with the IRS for you. I was super skeptical but desperate because my tax situation with mixed income sources was complicated. They got me connected to an IRS agent in about 20 minutes when I had been trying for days on my own. The IRS agent explained exactly how my K-1 loss affected the investment income calculation for EITC purposes. Turns out in my case, the loss didn't help me qualify because of how it was classified, but at least I knew for sure instead of guessing.

I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, I decided to try it anyway because I was desperate to figure out how my 1099-NEC and K-1 affected my EITC eligibility before filing. I figured I'd just dispute the charge when it inevitably didn't work. Well, I'm eating my words now. They got me connected to an IRS representative in about 30 minutes when I had been trying for DAYS. The IRS person confirmed that my consulting income on the 1099 counted as earned income for EITC, and clarified exactly how my K-1 losses affected the investment income limit. Turns out in my specific situation, I qualified for about $4,200 in EITC that I wouldn't have claimed otherwise. Seriously saved me from leaving money on the table and prevented a potential audit for claiming it incorrectly. Worth every penny for the peace of mind.

Something important to consider is that the EITC has different income phaseouts depending on your filing status and number of qualifying children. With two kids and head of household status, your 1099 income of around $65K might be near the upper phaseout range, meaning you might qualify for some EITC but not the maximum amount. For 2024 (filing in 2025), I believe the EITC completely phases out around $59,000-$63,000 for head of household with two children. Your $65K might put you just above that limit, but deductions from your consulting business could bring your income down to qualifying range. Things like home office, business supplies, professional development, and even part of your health insurance might be deductible.

Don't forget that your K-1 might include DIFFERENT types of income and losses, not just investment income! Some K-1 income could actually be considered earned income if it's from a partnership where you materially participated. The tax code treats different boxes on the K-1 differently. For example, Box 1 (ordinary business income) from an S-corporation or partnership where you materially participate could count as earned income for EITC purposes. But passive investment income like interest, dividends, or capital gains on your K-1 wouldn't count as earned income, only toward the investment income limit.