Earned Income Tax Credit (EITC)

For many Americans, their tax refund is the single largest payment they will receive in a given year. And the Earned Income Tax Credit helps qualifying taxpayers reduce the amount of taxes they owe. The Internal Revenue Service (IRS) estimates that 78 percent of all eligible taxpayers claimed the EITC amounting in an average refund of $2,400. 

Don’t miss out on a possible larger refund. Get the credit you deserve by learning about EITC and whether you qualify. 

What is EITC?

Congress created the EITC to help low- to moderate-income workers and their families get a tax break. Eligible taxpayers can use the credit to reduce the taxes they owe, possibly increasing their refund. Twenty-eight states offer residents an EITC. Tax credits, such as the EITC and Child Tax Credit, lifted 5.6 million people out of poverty in 2018, including three million children.

Who Qualifies for EITC?

Use the IRS’s EITC Qualification Assistant created to determine your eligibility. Your individual EITC is calculated based on income, marital status and number of children. Military families may also claim EITC, but be sure to review the Special EITC Rules, as using this credit may affect other government benefits.

If you qualify for EITC, you must file a federal income tax return and claim the credit to get it, even if you owe no tax or aren’t required to file a return. If you earn $57,000 per year or less, you can access free tax return preparation services available at more than 13,000 community volunteer tax assistance sites. If you earn $72,000 per year or less, you can use brand-name software products through IRS’s Free File and electronically file your return to claim your EITC. Visit www.IRS.gov to access the software. Note: claiming the EITC may delay your refund; find out more about that here.

The IRS works with national partners, including banks and thousands of local partners and governments. These partnerships provide free EITC tax return preparation and tax help, and tax education.

Choosing a Tax Preparer

You should choose a tax preparer carefully. You are responsible for the accuracy of your own return. If you pay someone to prepare your tax return, the preparer must sign it and include their Preparer Tax Identification Number. Don’t ever sign a blank tax return. 

Get the Most Out of Your Refund

Research indicates that families mostly use the EITC to pay for necessities—credit cards, maintaining vehicles needed for the commute to work and more, including:

• Get Peace of Mind. The pandemic has taught us the need to have cash on hand to cover unexpected expenses is paramount. Even $500 saved can help you weather a lot of emergencies and help put your mind at ease. 
• Pay Off Debt. Depending on the amount of your refund, you can pay off several smaller bills, or tackle a larger bill that you can pay off entirely. You can then pay off additional debt with the money you freed up when you paid off a debt.
• Eliminate the Small Stuff. The little things add up, like monthly subscriptions or streaming services like Netflix, Apple Music, and many others. Consider paying them in full for the year. 
• Invest in Yourself. Use your tax refund to pay for additional training, a work-related event or membership in a professional organization.
• Pay Down Your Car Loan. Pay the next month or two of your car payments in advance. The sooner you pay off your car, the sooner you can be free of that monthly payment.