What is the earned income tax credit (EITC)?
September 1, 2022 4 min read
The earned income tax credit (EITC) gives a tax break to workers and families who bring in low to moderate income. It’s a refundable tax credit that helps put money back in people’s pockets—primarily if they earn less than many other Americans—while incentivizing employment.
You'll owe less in taxes if you’re eligible for this credit. And, if you're entitled to one, the credit may get you a larger tax refund, so it’s worth checking out. By learning whether you qualify, you might be able to claim the EITC when you file your federal income taxes—and not leave money on the table.
- The EITC is a federal refundable tax credit that can help low- to moderate-income workers save money on federal income taxes.
- If you qualify for the EITC, you will owe less in taxes and may get a bigger tax refund.
- You can check your eligibility for the EITC with an IRS calculator.
An overview of the earned income tax credit
Established in 1975 to help low-income working families, the EITC has now offered $60 billion in tax refunds to 25 million taxpayers—an average of $2,411 per person. In fact, the IRS says that four out of five workers claim the EITC when filing taxes. There are 28 states, plus the District of Columbia, that also offer a state-level EITC.
To claim the federal EITC, some form of earned income is required. This includes all taxable income from working.
Types of earned income
Here are some examples of earned income:
- Salaries, wages and tips that have been reported on a W-2 tax form
- Income where an employer didn’t withhold taxes, such as income earned by driving for a rideshare service or selling goods online
- Income from self-employment
- Nontaxable combat pay
- Certain disability benefits received before the minimum retirement age
What doesn’t qualify as earned income?
Among other things, earned income doesn’t include the following:
- Social Security
- Child support
- Unemployment benefits
Who qualifies for the earned income tax credit?
To be eligible for the EITC, there are a few basic qualifications:
- File a federal tax return. A person doesn’t have to owe taxes to be eligible. The EITC has different requirements based on filing status, annual earnings and number of children.
- Be a U.S. citizen or resident alien and have a valid Social Security number. Anyone claimed on the filer’s tax return must also have a valid Social Security number. An individual taxpayer identification number (ITIN) can’t be used to file a claim.
- Earn less than the maximum adjusted gross income (AGI). Check out the EITC table to learn what the maximum AGI is—based on the number of children or relatives claimed when filing.
- Earn less than the maximum investment income. The investment income limit for the 2022 tax year is $10,000 or less.
- Have no foreign earned income reported via Form 2555.
Qualifying status for the tax credit may change based on things like employment, parental status or disability payments. And keep in mind that refunds aren’t typically delivered to eligible individuals right away, because the IRS must wait until mid-February to issue EITC refunds.
Qualifying with no children
The basic qualifications for taxpayers without children include:
- Meet the basic qualifications for the EITC.
- Not be claimed on another taxpayer’s tax return as a qualifying child.
- Live in the U.S. for more than six months of the tax year.
- Be at least 18 years old at the end of the tax year or, for full-time students, be at least 24 years old during the tax year.
Qualifying with children
People with qualifying children or relatives may qualify for additional credit. Among other things, there are a few qualifications for claiming a child when filing, including:
- The child must be 19 years old or younger or be a full-time student who’s younger than 24 years old. There aren’t any age restrictions if a child is disabled.
- The child must have a Social Security number.
- The child must have lived with the filer in the United States for more than half the year.
Still not sure about qualifications for the EITC? Check eligibility with the IRS assistant calculator.
Earned income tax credit in a nutshell
The EITC helps low-earning taxpayers reduce their taxes—and maybe even get money back. So it’s worth checking to see if you may be eligible.