The Earned Income Tax Credit (EITC) is a refundable tax credit designed to benefit low- and moderate-income workers and families, particularly those with children. It reduces the amount of tax owed and can increase a tax refund if the credit exceeds the taxes due
. Key points about the EITC include:
- It is refundable, meaning if the credit amount is more than the taxes you owe, you receive the difference as a refund
- You must have earned income from working, such as wages or self-employment income, and your income must be below certain IRS limits that vary by year and family size
- The credit amount increases with the number of qualifying children you have, but even workers without children can qualify, though for a smaller credit
- Eligibility criteria include age requirements (generally 25 to 65 years old if no children), limits on investment income, and residency rules for children claimed as dependents
- Special rules apply for separated couples, military members, clergy, and people with disabilities
- To claim the EITC, you must file a federal income tax return, even if you owe no tax
In summary, the EITC is a tax benefit aimed at supporting working people with low to moderate income by reducing their tax burden and potentially increasing their tax refunds, with larger benefits for families with children
