The Earned Income Tax Credit (EITC) is one of the largest credits offered to U.S. taxpayers. Available since 1975, it can help to reduce tax liability or even provide a tax refund. This can provide a helpful financial boost for those with low-to-moderate income levels.
Read on to learn what the EITC is and how to qualify. Plus, we’ll answer some commonly asked questions about the EITC.
What is the Earned Income Tax Credit (EITC)?
The EITC is a fully-refundable tax credit available for qualifying taxpayers. It is designed to serve as an income supplement for taxpayers with low-to-moderate incomes, whether you’re self-employed or work for an employer.
Your earned income must be below the year’s limit, along with a few other eligibility requirements to qualify for the EITC. The income limits and credit amounts are updated each year, so it’s good to check if you are eligible every year when filing your tax return.
Earned Income Tax Credit in 2020
The EITC income limits and maximum credits for the 2020 tax year are as follows.
2020 EITC income limits
This chart shows the income limits based on filing status and the number of qualifying children you claim on your tax return.
|Single, Head of Household, or Widowed||$15,820||$41,756||$47,440||$50,594|
|Married Filing Jointly||$21,710||$47,646||$53,330||$56,844|
2020 maximum credit amounts
The maximum amount that you can get from the EITC for the 2020 tax year is:
- $6,660 with three or more qualifying children.
- $5,920 with two qualifying children.
- $3,584 with one qualifying child.
- $538 with no qualifying children.
The income limits and credit amounts have all increased since 2018. They typically grow by $50 to $100 every year to account for inflation.
The size of the credit you get depends on how many children you have and how much money you make. You can calculate your credit by completing a worksheet in the instructions section on form 1040, or you can have the IRS figure it for you (see chapter 29 of Pub. 17 of the IRS code for further instructions).
Do I qualify for the Earned Income Tax Credit?
To enjoy the benefits of this tax credit, you must fit the following criteria.
First, your earned income must be under the tax year’s maximum income limit for your situation. Additionally, you must:
- Have a valid social security number.
- Not be filing as “married filing separately.”
- Be a U.S. citizen or resident alien for the entire year.
- Not have an investment income of over $3,500.
- Not file Form 2555 or 2555-EZ related to foreign earned income.
You are not required to have a qualifying child, but the requirements vary depending on whether or not you do.
Additional EITC requirements
If you have a qualifying child, that child must meet these other requirements:
- Live with you for more than half of the year in the United States.
- Be younger than you and younger than 19, or younger than you and a full-time student that is under 24, or be permanently disabled at any age.
- Have a qualifying relationship to you, including your child, stepchild, adopted child, sibling, half-sibling, step-sibling, or a descendant of any of the above.
- Not be claimed on anyone else’s tax return.
If you don’t have a qualifying child, you must meet the following requirements:
- Be at least 25 but under 65.
- Not be a dependent on anyone else’s tax return.
- Lived in the U.S. for more than half of the year.
If you qualify, you can likely get some help on your taxes for the year. If you aren’t sure whether you meet all the eligibility requirements, use the IRS EITC Assistant tool.
Frequently asked questions about the EITC
Here are the answers to frequently asked questions about EITCs.
When will EITC refunds be released?
The IRS generally releases refunds for returns claiming the EITC around mid-February.
Is there a California Earned Income Tax Credit?
California does have an Earned Income Tax Credit. You may qualify if you live in the state, have a low-to-moderate income, are between the ages of 25 and 64, and make less than the income limits for the year. Further, it’s possible to qualify for both the state and federal earned income credits.
Which states offer an Earned Income Tax Credit?
California isn’t alone. As of 2020, 28 states and the District of Columbia have state-level EITCs.
The following states offer refundable EITCs: OR, CA, MT, CO, NM, NE, KS, MN, IA, LA, WI, IL, IN, MI, NY, NJ, MD, DC, VT, MA, CT, ME, and RI.
These states offer non-refundable EITCs: HI, OK, OH, VA, SC, DE.
How much is the federal Earned Income Tax Credit?
The value of the earned income tax credit changes each year, and the amount you can get depends on various factors. For 2020, the maximum credit available is $6,660.
Optimize your tax return
If you want to be sure to take advantage of every credit and deduction you qualify for, we recommend enlisting the help of an experienced and reputable tax preparation firm. While it will cost a bit out-of-pocket, an experienced professional will usually earn you back what you’ve spent and then some. To find trusted tax experts, review the companies below, and find the right fit for your situation.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.