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The earned income tax credit was established in 1975 to offset Social Security taxes and surging inflation.
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The earned income tax credit (EITC) can reduce taxes and increase refunds for low- and moderate-income workers and families.
The dollar amount of credits ranges from $560 to $6,935 for 2022, depending on income, filing status, and dependents.
The EITC was established in 1975 to help lower-income workers offset Social Security payroll taxes and rising food and energy costs.
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The earned income tax credit, or EITC, is aimed at giving low- to moderate-income workers and families a tax break. The dollar amout of credits ranges from $560 to $6,935 for the 2022 tax year and from $600 to $7,430 in 2023. The amount you receive depends on your income, filing status, and how many children you have. Eligible workers without children can also claim the earned income tax credit.
In general, the less you earn, the greater the earned income credit. Since it’s a refundable tax credit, lower-income taxpayers who have little to no income-tax liability can still receive the total amount of the credit in the form of a tax refund.
It’s important to note that tax deductions and tax credits can both change the amount of tax you owe, but they work differently. Deductions lower the amount of your total income that is subject to taxation, while credits reduce the amount of tax you owe, and some, like the EITC, can provide a refund even if you don’t owe any tax.
Who qualifies for the federal EITC?
The EITC was established by the Tax Reduction Act of 1975 as a temporary way to help lower-income workers offset Social Security payroll taxes and rising food and energy costs. It was considered “both an anti-poverty program and an alternative to welfare because it incentivized work.” The Revenue Act of 1978 made the EITC permanent.
To qualify for the EITC for the 2022 tax year, you’ll need:
At least $1 of earned income from employment or self-employmentLess than $10,300 of investment income for the tax yearNo foreign income for which you claim the foreign earned income exclusion on Form 2555A valid Social Security numberUS citizenship or resident alien statusA filing status other than married filing separately unless you meet new requirements for married but separated spousesA qualifying child who meets the age, relationship, residency, and joint return requirementsOr, without a qualifying child, must have lived in the US for more than half the year, not be claimed as a dependent by anyone else, and be between the ages of 25 and 65 at the end of the tax year
There are special qualifying rules for military and clergy members and workers who have disability income or children with disabilities. To find out if you’re eligible for the credit, you can use the EITC Assistant on the IRS website.
Quick tip: If you qualify for the EITC, you may be eligible for other tax credits, such as the child tax credit, the child and dependent care credit, and education credits.
In addition to the basic requirements, your adjusted gross income (AGI) must be below the income thresholds to qualify. Here’s a rundown:
Earned income tax credit for 2022
Dependents
Maximum AGI
(single or head of household)
Maximum AGI (married filing jointly)
Maximum EITC
0
$16,480
$22,610
$560
1
$43,492
$49,622
$3,733
2
$49,399
$55,529
$6,164
3 or more
$53,057
$59,187
$6,935
The income limits and maximum credits are increasing across the board for 2023. Here’s what to expect:
Earned income tax credit for 2023
Dependents
Maximum AGI
(single or head of household)
Maximum AGI (married filing jointly)
Maximum EITC
0
$17,640
$24,201
$600
1
$46,560
$53,120
$3,995
2
$52,918
$59,478
$6,604
3 or more
$56,838
$63,398
$7,430
If you didn’t claim the earned income tax credit for previous years and think you may have qualified, there may still be time. You can file an amended tax return to receive the credit for any (or all) of the previous three tax years for which you should have received the credit.
Important: You must file a tax return to get the earned income tax credit, even if you wouldn’t need to file otherwise.
How has the EITC changed?
The American Rescue Plan Act (ARPA) of 2021 “expanded the impact of the EITC in a few ways, with some rules impacting just 2021 and others impacting both 2021 and future years,” says Steve Wittenberg, director of legacy planning at the technology and investment firm SEI.
For the 2021 tax year, there was a special rule that made it easier for people with no children to claim the credit and roughly tripled the amount they qualified for, notes Sallie Mullins Thompson, a CFP® professional and certified public accountant at her self-named tax and accounting firm in New York.
Meanwhile, the limit for allowable investment income was bumped up from $3,650 in 2020 to $10,000 or more for 2021 and beyond.
ARPA also adjusted the requirements for married but separate spouses, “who can now claim the EITC if they don’t file joint returns, they live with the qualified child for more than half the year, and either they are legally separated under state law or they don’t have the same principal place of abode as the other spouse for at least the last six months of the year,” says Wittenberg.
The bottom line
The earned income tax credit can provide a substantial tax break to lower-income workers and families. If you fall within the income and filing guidelines, be sure to claim the credit on your return when you file your taxes — but keep in mind that you won’t get your refund right away. By law, the Internal Revenue Service has to wait until March to issue refunds to taxpayers who claim the EITC.
“Due to years of fraudulent filings for this credit, the IRS has implemented more restricted processing procedures, thus delaying refunds for certain situations until further investigation can be carried out,” says Mullins Thompson.