The Earned Income Tax Credit, or EITC, is a refundable tax credit available to individual income tax filers who have earned less than a threshold level of income in the prior year. The EITC can be used to reduce the amount of taxes you owe in a given year, and because it is a refundable credit, it can result in a payment back from the government if the credit is greater than the taxes you owe.
About the EITC
The EITC is designed to be a tax break to low-income earners without children, or to lower-to-middle income earners with eligible children. The maximum amount of money you can make in a year and still qualify for the EITC varies based on your marriage status and the number of children you have. Unlike most tax-reduction methods, EITC credits are refundable, meaning that when the credit exceeds the amount of taxes you owe, the Internal Revenue Service will issue you a payment for the difference.
EITC Income Requirements
For the 2010 tax year, the most current as of publication, the maximum income for a single earner with no children is $13,460. Married couples filing jointly without children have a maximum of $18,470. With one qualifying child, these maximums are increased for single and married filers respectively to $35,535 and $40,545; for two children, $40,363 and $45,373; and for three or more children, $43,352 and $48,362. These numbers change annually, so if you are looking for a tax year after 2010, refer to current IRS information to determine if your income level is eligible.
EITC Maximum Credit
With no children, the EITC credit is $457. With one qualifying child, this increases to $3,050. For two children, the EITC credit is $5,036. For three or more children, the EITC credit is $5,666.
Children must pass IRS eligibility requirements for the household to qualify for the maximum EITC. However, there are additional qualifiers providing special benefits for disabled filers or filers caring for disabled children, members of the military, clergy members and people living in disaster areas. See the IRS guidelines for EITC eligibility for more information.