What is the federal EITC?
- The Earned Income Tax Credit (EITC) is a federal tax credit for low-income working individuals and families. It is intended to reduce the tax burden on low-income workers, supplement their wages, and assist in the welfare-to-work transition. Even workers whose income is too small to pay taxes can receive a refund of the EITC, which provided over $34 billion to 19.3 million low-income families in 2003.
- The EITC is one of the most successful federal anti-poverty programs ever developed. The impact of the EITC on a working family’s income can be considerable. For example, in 2005, a single parent raising two or more children and earning between $11,000 and $14,400 is eligible for the maximum EITC of $4,400—a full 30 to 40 percent increase in the family’s income. Taxpayers with one child can claim a maximum EITC of $2,662.
- More than 4 million people—roughly half of them children—escape poverty each year due to the EITC. A study by Columbia University's National Center for Children in Poverty found the EITC reduces poverty among young children by nearly one fourth.
- The EITC significantly increases the number of single parents who join the workforce. One study found the proportion of single mothers who worked increased dramatically between 1984 and 1996 due to increases in the amount of the EITC.
- Interviews suggest that EITC workers use their refunds to pay off debt, invest in education, and secure decent housing, thus enhancing economic security and promoting economic opportunities in their neighborhoods.
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The general EITC requirements are:
- All individuals on the federal tax return must have a valid Social Security Number
- You must have earned income from employment or from self-employment.
- Your filing status cannot be married, filing separately.
- You must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
- You cannot be a qualifying child of another person.
- If you do not have a qualifying child, you must:
- be age 25 but under 65 at the end of the year,
- live in the United States for more than half the year, and
- not qualify as a dependent of another person
There are other special rules that may apply. Please visit www.irs.gov for more information.
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EITC Info
