What's the Earned Income Tax Credit?

The Earned Income Tax Credit (EITC) is a credit the federal government offers to taxpayers who earn low-to-moderate wages. This refundable credit can be a significant source of income for parents, and low-income taxpayers without children can claim a smaller credit. While the EITC was created in 1975 to assist low-income families, it has evolved over the last 40-plus years to offer advantages to single filers also. Individuals who are 25 and older and annually earn less than $16,480 can qualify for a refund of as much as $560 through this credit, even if they have no children.

The credit is refundable, meaning it can lower your tax bill, and when lowering below $0 it can also generate a refund for you. Both single and married people, with and without qualifying dependents, may qualify for the EITC as long as they earn some income in the applicable tax year. It is eligible for taxpayers who are employed by an employer and also self-employed. You must file a tax return to claim an EITC, even if you're otherwise not obligated to file a return.

The EITC's basic qualifying standards are the same as with any other deduction or credit. You need to have a social security number, the names and social security numbers of your dependents, and your W-2, 1099, as well as all other documents stating income. You also must have been a U.S. citizen or legal resident alien during the previous tax year to quality for the tax credit. If you wish to file online, you will need last year's tax return handy because you'll also need information such as your adjusted gross income, to electronically sign your filing.

The IRS has income thresholds that determine whether you qualify for the EITC. For the tax year ending December 31, 2022, income must not have exceeded $16,480 for single filers with no dependents, and $22,610 if you're married filing jointly, and have no dependents. Single people with one dependent can earn up to $43,492, up to $49,399 with two dependents, and up to $53,057 with three or more dependents. Married people filing jointly with one dependent can earn up to $49,622 and still claim the EITC. Those with two dependents can earn up to $55,529, and those with three dependents can earn up to $59,187.

How much is the earned income credit for 2020?

For those with dependents, the credit can be substantially more. Unfortunately, the IRS notes that nearly 20 percent of those eligible for the EITC fail to claim it. There are a few causes for someone not to be eligible for this credit. For example, if you earn income from investments, more than $10,000 annually, you won't qualify. This figure may change annually from 2021 on as it is indexed for inflation. You also don't qualify if you claim foreign income on your U.S. tax return. In additional to the EITC, if you qualify for the Additional Child Tax Credit, you can still claim the EITC, but the IRS may postpone your refund until after March 1.

Earned Income Tax Credit Eligibility Checklist

Here is a "due diligence" checklist gleaned from IRS Form 8867 and IRS Publication 3524 designed to determine eligibility:

The EITC 'Delay'

With the adoption of the Protecting Americans from Tax Hikes (PATH) Act in 2015, the IRS will no longer issue tax returns that claim the EITC or ACTC until after Feb. 15. The PATH Act provides more time for the IRS to review and validate EITC claims.

What are some reasons you may not qualify for the Earned Income Credit?

You must complete Schedule EIC and file it with your tax return to claim the EIC. Sometimes, though, the IRS may reject your claim. Common reasons for rejection include:

You can find more related information on this topic and other tax credits on these pages:


Q&A: What is the income limit to claim the Earned Income Tax Credit (EITC)?

The income limit to be eligible for the EITC is adjusted each year for inflation. In addition to this, it is also adjusted in accordance with the number of qualifying dependents the taxpayer can claim. For tax year 2022, in order to claim the EITC, a taxpayer's adjusted gross income (AGI) must be less than the following: