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


*2015 update:

Earned Income Tax Credit (EITC) Awareness Day is Friday, January 30, 2015.

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

2015 EITC Income Limits & Maximum Credit Amounts
Investment income must be $3,400 or less for the year

Number of Qualifying Children

Individual Filer

Joint Filer

Maximum Credit

Zero

$14,820

$20,330

$503

One

$39,131

$44,651

$3,359

Two

$44,454

$49,974

$5,548

Three or more

$47,747

$53,267

$6,242

Source: Internal Revenue Service (IRS), http://www.irs.gov/Individuals/Preview--EITC-Income-Limits

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. Thus, earned income is put back into the pockets of working individuals and families.

In 2012, the EITC represented nearly $61 billion to working, taxpaying households through the country. The credit recieved through NWI VITA SItes was $430,695—representing substantial help for low- to moderate-income families that work and play by the rules, but still struggle to cover their bills and basic day-to-day expenses.

"This is a vital income support ," said Melissa Bohacek, Communications Manager, with NWICA. As part of the NWI Asset Building Campaign NWICA will operate a site out of its main office in Crown Point, filing up to 140 income taxes per Saturday.

This is 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)

Given the current economic recession, the EITC may be more important to working families than ever before. Workers who were eligible for the EITC in prior tax years, but did not claim it, can amend their tax returns to retroactively claim the EITC for up to three years.

In addition to the federal EITC Indiana is one of 24 states that have their own state EITC to supplement the federal credit. State EITCs range from 3.5 percent to 35 percent.

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. The EITC lifted an estimated 6.6 million people out of poverty in 2010, including 3.3 million children. President Reagan also called the EITC part of the "best anti-poverty, the best pro-family, and the best job-creation measure to come out of Congress." Yet, despite this fact one out of every five people eligible for the EITC do not claim it. (iii)

To learn more about the impact of the EITC, see paper released by one of the Institute's partner's, the National Community Tax Coalition at: www.taxcreditsforworkingfamilies.org/wp-content/uploads/2012/01/NCTC-EITC-paper_Jan2012.pdf

To learn more about the federal EITC visit: http://www.eitc.irs.gov/central/abouteitc/.

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

ii Internal Revenue Service. EITC limits, Maximum Credit Amounts, and Tax Law Updates, Retrieved on 20 January 2010. Available at: http://www.irs.gov/individuals/article/0,,id=150513,00.html.


iii National Community Tax Coalition. "The Earned Income Tax Credit, Good for Our Families, Communities, and Economies." January 2012: Available at: http://www.taxcreditsforworkingfamilies.org/wp-content/uploads/2012/01/NCTC-EITC-paper_Jan2012.pdf.