The Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) are federal refundable tax benefits for lower- and moderate-income workers. Most tax credits are non-refundable and simply reduce the amount of taxes a filer owes. Refundable tax credits differ because they provide a refund to a filer even if the credit value is more than the amount of taxes owed. Refundable tax credits are important because they have the same value for all workers regardless of their income.
The EITC is worth up to about $6,000 for families with children who work and earn less than about $50,000. Workers not raising children who earn less than about $15,000 also can qualify. In addition to the EITC, some families also can get the CTC, which can be worth up to $1,000 per child. The EITC and CTC help workers care for their families, withstand unexpected economic changes, and reduce poverty. Research shows that the tax credits also have long-term benefits. Children in families that get the EITC perform better in school, have improved health outcomes, and earn more as adults.
To claim the credits, eligible workers must file a tax return. Preparing a tax return can be complicated and may seem overwhelming. That’s why it’s so important for lower-income tax filers to know there’s an alternative: Volunteer Income Tax Assistance (VITA). This IRS-sponsored program works with community organizations to provide high quality tax preparation to lower-income tax filers — free of charge! Learn more about VITA here.