The EITC is a tax benefit for working people who earn lower or moderate incomes. The credit offsets taxes, supplements very low wages, and encourages work.
The EITC can help cover any federal income tax workers may owe at tax time. Besides offsetting taxes, workers earning lower wages may also get cash back through the EITC refund. Eligible workers who claim the EITC on their tax return can receive a refund even if they do not owe income tax.
The EITC is worth up to $6,242 for jobs worked in 2015. The amount of the EITC refund is based on income and family size. For more details about the credit amount, see the EITC and CTC Eligibility Comparison Chart and the chart of EITC Benefits.
CLAIMING THE CREDIT
Workers with children
Workers without children
Workers without children can file any tax form, including Form 1040EZ. They do not need to file the Schedule EIC and can enter the credit amount on the EIC line of the tax form.
For more information, please see frequently asked questions.
Married tax filers must file a joint return to get the EITC. Workers who are married filing separately cannot claim the EITC.
Earned Income Includes:
Taxable Earned Income:
- Wages, salaries, and tips
- Union strike benefits
- Long-term disability benefits received prior to minimum retirement age
- Net earnings from self-employment
- Gross income received as a statutory employee
- Exception: Military combat pay is not taxable earned income, up to the highest pay level for enlisted personnel. Military personnel may choose to count their non-taxable combat pay in determining eligibility for the EITC, if it is advantageous to do so.
If investment income exceeds $3,400 in 2015, the EITC may not be claimed. Investment income includes taxable interest, tax-exempt interest, and capital gain distributions.
For more detail, see IRS Publication 596, “Earned Income Credit.”
Earned Income does not include:
- Interest and dividends
- Social security and railroad retirement benefits
- Welfare benefits
- Workfare payments
- Pensions or annuities
- Veterans’ benefits (including VA rehabilitation payments)
- Workers’ compensation benefits
- Alimony and Child Support
- Non-taxable foster care payments
- Unemployment compensation (insurance)
- Earnings for work performed while an inmate at a penal institution
- Taxable scholarship or fellowship grants that are not reported on Form W-2
Nontaxable earned income:
- Salary deferrals (i.e. under a 401(k) plan)
- Military basic housing and subsistence allowances
- Meals or lodging for the convenience of a taxpayer’s employer
- Housing allowance or rental value of a parsonage for the clergy
- Excludable dependent care benefits
- Salary reductions (i.e. under a cafeteria plan)
- Anything else of value you get from an employer for services you performed even if it is not taxable
EITC PARTICIPATION BY STATE
This map shows the number of families in each state that claimed the EITC and the total dollar amount claimed in each state.
View the data:
- Number of Children Who Benefit from the EIC by State Tax Year 2010 (Brookings Data)
- Number of People Lifted out of Poverty by the EIC & the CTC Tax Year 2009 – 2011 (Brookings Data)
In addition to the federal EITC, state-level EITCs can make more money available to lower-income workers while demonstrating a state’s commitment to reducing poverty among working families. Most states with state EITCs set their benefit as a percentage of the federal credit, making them easy to administer. Nearly all state EITCs are “refundable,” making them available to workers even if they do not owe state income taxes.
For more information on state EITCs or starting an EITC in your state, see the following Center on Budget and Policy Priorities reports:
- How Much Would a State Earned Income Tax Credit Cost in Fiscal Year 2015?
- States Can Adopt or Expand Earned Income Tax Credits to Build a Stronger Future Economy
- A Hand Up: How State Earned Income Tax Credits Help Working Families Escape Poverty in 2011
Recent Blog Posts
Democratic Senators introduced legislation to fight poverty through tax credit expansion, proposed legislation aims to make child care affordable, and CFED releases a new fact file about credit’s impact on…
Massachusetts Senate proposes bill to increase the EITC by taxing short-term rentals, the Tax Credits for Working Families explores how the EITC could make housing more affordable, and CFED covers…