The Earned Income Tax Credit (EITC) is a federal tax benefit for low and moderate-income working people. The EITC offsets some or all of a worker’s federal income taxes and in many cases provides a supplemental source of income to help offset other taxes, such as sales or payroll taxes. More than 27 million workers receive the EITC. The credit lifts more than 6 million Americans, including 3 million children out of poverty each year, making it one of the nation’s largest and most successful anti-poverty programs.
The size of a worker’s EITC depends on his or her income, marital status and number of children. The credit amount increases with each dollar earned until it reaches a maximum level and then begins to phase out at higher income levels. The EITC is “refundable,” meaning it can exceed a low-wage worker’s income tax liability:
The EITC is currently targeted primarily towards workers raising children. For Tax Year 2015, workers with dependent children that have annual incomes below $53,300 may be eligible for the federal EITC. Workers without dependent children earning less than $14,800, or $20,300 for a married couple, can receive a very small EITC. There are a number of efforts underway at both the federal level and in the states to expand the EITC for these workers.
For more information about the Earned Income Tax Credit: