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Earned Income Tax Credit Good for Families, Communities, and the Economy


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*2020 update:

Earned Income Tax Credit (EITC) Awareness Day is Friday, January 31, 2020.

The IRS Website allows individuals to determine their own eligibility for the EITC. Please see important notes and instructions at the Internal Revenue Service (IRS) Website.

The EITC is a federal tax credit for low- to moderate- income working individuals and families. In general, working families with children and earning an annual income below $50,000 are eligible to receive the tax credit (see chart below). Also, the Department of the Treasury reminds us that, "many grandparents are the primary caregivers for their grandchildren under age 19 (24 if a full time student). If the child lives with the grandparent for more than six months of the year and the grandparent is recieving wages of less than $53,000, they should explore the eligibility criteria to see if they could qualify for EITC."

The amount of EITC received is dependent upon a worker's income, marital status, and number of children.


Investment income must be $3,400 or less for the year

2019EITC Income Limits & Maximum Credit Amounts
Investment income must be $3,650 or less for the year

Number of Qualifying Children

Single, Head of Hshld or Widowed

Married Joint Filer

Maximum Credit

Zero

$15,570

$21,370

$538

One

$41,094

$46,884

$3,584

Two

$46,703

$52,493

$5,920

Three or more

$50,162

$55,952

$6,660

Source: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-tax-credit-income-limits-and-maximum-credit-amounts

The credit reduces the tax burden placed on workers by offsetting payroll and income taxes. The credit is also refundable—meaning that if the credit exceeds the amount of taxes owed, the difference is given back to the worker.

"This is a vital income support ," said Melissa Bohacek, director of communications, with NWICA. Especially positive since the money is often spent in local economies. Economists suggest that every increased dollar received by low- and moderate-income families has a multiplier effect of between 1.5 and 2 times the original amount, in terms of its impact on the local economy and how much money is spent in and around the communities the families live in.(i)

The EITC is often cited as one of the most effective anti-poverty programs, lifting more children out of poverty than any other single program or category of programs in the US. In 2016, the EITC was estimated to lift 6.5 million people out of poverty, including 3.3 million children. The severity of poverty was reduced for an additional 21.2 million families, including 7.7 million children. Yet, despite this fact one out of every five people eligible for the EITC do not claim it. (iii)

To learn more about the state EITC visit: http://www.in.gov/dor/3803.htm.