The Earned Income Tax Credit, commonly called the EITC, is a refundable federal tax credit for people who earn low to moderate income from work. Refundable means that if the credit is larger than the taxes you owe, you receive the difference as a refund. For families with children, the EITC can be worth several thousand dollars per year. The IRS estimates that roughly one in five eligible workers does not claim it, leaving significant money uncollected.
Who qualifies
Eligibility is based on earned income, which includes wages, salaries, and self-employment income, as well as filing status and family size. For the 2023 tax year, single workers without children qualified with income up to about $17,640, while families with three or more children qualified with income up to about $56,838 for married filers. Investment income must be under a separate limit. You cannot claim the EITC if you file as married filing separately, or if you are claimed as a dependent on someone else's return.
What it is worth
The credit amount varies significantly by family size and income level. For the 2023 tax year, the maximum credit was $600 for workers with no qualifying children, $3,995 for one child, $6,604 for two children, and $7,430 for three or more children. The credit phases in as income rises, reaches a maximum, and then phases out. The IRS has an EITC Assistant tool on irs.gov that calculates whether you qualify and gives you an estimate of the credit amount for your specific situation.
How to claim it
The EITC is claimed on your federal tax return by filing Schedule EIC if you have qualifying children, or by indicating you are claiming it on the standard Form 1040 if you do not. Most tax software programs, including the free versions, handle this automatically if you enter your information correctly. Free tax filing and preparation is available through the IRS Free File program, available on irs.gov, and through VITA (Volunteer Income Tax Assistance) sites, which offer free in-person tax help for households earning roughly $67,000 or less.
Common reasons people miss it
Many people who qualify for the EITC do not claim it because they assume they do not owe taxes and therefore do not need to file a return. But because the EITC is refundable, you can receive money back even if you owe nothing. Filing a return when you are not required to, purely to claim the EITC, is perfectly legal and common. Others miss it because their income or family situation changed during the year and they assume they no longer qualify — eligibility is based on the full tax year, so it is worth checking annually even if you were not eligible before.
State EITC programs
More than 30 states offer their own Earned Income Tax Credit on top of the federal credit. State credits are usually calculated as a percentage of the federal credit, ranging from a few percent to over 40 percent depending on the state. If you qualify for the federal EITC and live in a state with its own program, the combined value can be substantially higher than the federal credit alone. Your state tax agency's website lists whether your state offers a credit and how to claim it.