What Is The Earned Income Tax Credit (EITC)?

Tax season is a stressful time, especially for those working hard to make ends meet. Thankfully, there is a tax benefit that may save you thousands of dollars. The earned income tax credit, also known as EITC or EIC, is a refundable tax credit that's available for low- to moderate-income taxpayers who work and earn an income. Understanding how the EITC works can help you maximize your tax refund during tax season.

Earned Income Tax Credit Definition

The EITC is a tax credit that can help those who qualify to reduce the taxes they pay. The EITC is a refundable tax credit, meaning you’ll receive a refund for any tax credit(s) provided over what you owe.

The amount you qualify for will depend on eligibility criteria such as the number of children you have (if any), your income, and tax filing status. Keep in mind you don’t need to have children to be eligible for this tax credit.

How Much Is The Earned Income Credit?

Depending on the eligibility factors outlined by the IRS, the earned income credit is a percentage of your earnings up to the maximum amount allowed.

The eligibility requirements change from year to year, so it is possible to qualify for the EITC one year and not the next, and vice versa. Let’s look at the eligibility guidelines and the maximum you can receive in the next 2 tax years.

Earned Income Tax Credit For Tax Year 2023

According to the Internal Revenue Service (IRS), you can receive $600 to $7,430 through the EITC for tax year 2023 (filed in 2024). The amount you receive largely depends on the number of children you have and your adjusted gross income (AGI).

Earned Income Tax Credit For Tax Year 2024

You can receive between $632 to $7,830 through the EITC for tax year 2024 (filed in 2025).

Who Qualifies For The Earned Income Tax Credit?

You’ll also need to meet other requirements besides income, including:

• Be a U.S. citizen or resident alien all year
• Have a valid Social Security number
• Have a minimum of $1 in earned income (unemployment and pensions are excluded)
• $10,300 or less in investment income for the year
• Married couples need to file jointly
• No filing of Form 2555, which relates to foreign earned income

Taxpayers who have qualifying children can’t be a qualifying child for another’s tax return. Qualifying children must also meet the relationship, age, residency, and joint return tests established by the IRS. Plus, the IRS requires that nobody else can claim you as a qualifying child or dependent on their tax return.

Those who don’t have children will need to be 25 – 64 years old to qualify for the EITC. You also need to have lived in the U.S. for more than half the tax year.

Note that the IRS has also established special rules for members of the clergy or members of the military, and those who receive disability income or care for children with disabilities.

Claiming Qualifying Children For The Earned Income Tax Credit

If you want to claim qualifying children for the EITC, you’ll need to meet additional criteria to claim them, including:

• The child needs to be a daughter, son, stepchild, adopted child, foster child or grandchild. Qualifying children can also be your brother, sister, half-brother, half-sister, stepbrother, stepsister or related to you as a niece or nephew.
• The child needs to be under age 19 at the end of the year, or under 24 if they are a qualifying full-time student. Children who are permanently disabled don’t have age limits.
• The child needs to have lived with you or your spouse for more than half the year and within the U.S.
• The child must have a Social Security number, which you must cite along with their birthdate.

How To Apply For The EITC

Filing a federal tax return is the only way taxpayers can apply for the EITC. To do so, you can either submit a paper or electronic return, and file it yourself or with the assistance of a professional.

More specifically, you’ll need to file either the Form 1040, 1040 SR, or the individual tax return to apply for the earned income tax credit. You’ll use the EITC Worksheet included in this form to calculate how much you’ll receive from the EITC. If you have one or more qualifying children, you'll also need to complete Schedule EITC and include it in your tax return when you file.

There’s also a separate worksheet for taxpayers who were self-employed at any time during the tax year. This worksheet also applies to members of the clergy, a church employee who files Schedule SE, or a statutory employee filing Schedule C.

Consider working with a tax professional or using a tax preparation service if you need assistance filing your tax return.

Earned Income Credit FAQs

Below are some of the most common questions about the EITC.

Can I claim the EIC from previous years?

You can go back and amend a previous year’s return to receive the credit if you qualified for it but didn't claim it. You usually have 3 years from the date you filed your original return to amend it if you’re claiming a refund. You can file an amended return within 2 years from the date you paid taxes owed on a return if that date is later than the first one.

Is the Earned Income Credit the same as the child tax credit?

The EITC and the child tax credit are not the same. It's possible to receive the EITC without children, but you need to have at least one child to claim the child tax credit. Both tax credits also have different eligibility requirements around income and refundability.

When will the IRS release Earned Income Tax Credit refunds?

The IRS expects to release EITC refunds by March 1, 2024.

The Bottom Line: The Earned Income Tax Credit Can Save You Money If You Qualify

The earned income tax credit can provide a tax break for qualifying people who have low to moderate income. If you're planning to do it on your own, learn more about the EITC on the IRS website, or work with a tax professional to help you file your tax return and determine your eligibility.

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