What an Earned Income Tax Credit Is

An Earned Income Tax Credit (EITC) is a refundable tax credit for people who work but earn low to moderate income. Unlike a deduction that reduces the income you report, a credit reduces the tax you owe dollar-for-dollar. If the credit is larger than the tax you owe, the IRS sends you the difference as a refund — that is what "refundable" means.

The EITC exists at both the federal and state level. The federal credit is run by the Internal Revenue Service (IRS). Many states offer their own version on top of it, usually worth 10 to 40 percent of the federal amount. You claim both on your tax return in the same year.

The credit is designed to reward work and reduce the tax burden on households with children or low earnings. It phases in as your income rises to a certain point, stays flat, then phases out at higher income levels. The exact amounts and income limits change every year.

Key Takeaways

  • The EITC is a refundable credit that reduces your tax bill and can result in a refund if the credit exceeds what you owe.
  • You must have earned income from work to claim the federal EITC, and income limits vary based on filing status and number of may have access to children.
  • The credit amount depends on your income, filing status, and number of may have access to children — more children generally means a larger credit.
  • You claim the EITC by filing a tax return with the IRS, even if you would not normally be required to file.
  • Many states offer their own EITC on top of the federal credit, so check your state's tax authority website to see if you may be may be able to access.

How the Credit Amount Is Calculated

The EITC is not a flat amount. It grows as your income rises from zero up to a certain threshold, holds steady for a range of incomes, then shrinks as you earn more. The IRS publishes tables each year showing the credit amount for different income levels and filing statuses.

The size of your credit depends on three things: your filing status (single, married filing jointly, or head of household), your earned income, and the number of may have access to children you claim. A single parent with two children will receive a larger credit than a single person with no children at the same income level. In 2024, the maximum federal EITC for a married couple filing jointly with three or more may have access to children was $3,995, but this amount changes annually.

You do not calculate the credit yourself. When you file your tax return, you report your income and the number of may have access to children, and the IRS determines the credit amount using its tables. Tax software and tax preparers handle this automatically.

Income Limits and Who Can Claim the Credit

To claim the federal EITC, you must have earned income — wages, salary, self-employment income, or similar compensation for work. Income from investments, unemployment benefits, or Social Security does not count as earned income and does not make you ineligible, but it does not help you may have access to either.

The income limits are different for each filing status and number of children. For 2024, a single filer with no may have access to children could earn up to $17,600 and still claim the credit. A married couple filing jointly with one may have access to child could earn up to $46,560. These limits rise slightly each year for inflation. You can find the current year's limits on the IRS website or ask a tax preparer.

You must also be a U.S. citizen or resident alien with a valid Social Security number, and you cannot be claimed as a dependent on someone else's return. If you are married, you must file jointly to claim the credit (with rare exceptions).

What Counts as a may have access to Child

A may have access to child for EITC purposes is not always the same as a dependent. The child must be your son, daughter, stepchild, foster child, or sibling (or a descendant of any of these). They must be under age 17 at the end of the tax year, live with you for more than half the year, and have a valid Social Security number.

The child cannot have more than $4,700 in unearned income during the year (this limit changes annually). If you have multiple children who meet these rules, you can claim each one, and the credit increases with each may have access to child.

If you and another person both could claim the same child — for example, a divorced parent and a grandparent — only one of you can claim the child for the EITC. If you cannot agree, the IRS has tiebreaker rules based on who the child lived with and for how long.

How to Claim the EITC on Your Tax Return

You claim the EITC by filing a federal income tax return with the IRS, even if you earned so little that you would not normally be required to file. You report your income, filing status, and the number of may have access to children on the appropriate form — usually Form 1040 with Schedule EIC if you have may have access to children.

If you use tax software, it will ask you questions about your income and children and calculate the credit for you. If you use a tax preparer, they will handle the calculation. If you file by hand, you use the IRS tables to find your credit amount based on your income and filing status.

You must file your return by the tax deadline — usually April 15 — to claim the credit for that year. The IRS allows you to amend a return for up to three years if you missed the credit or claimed the wrong amount.

State Earned Income Tax Credits

About 30 states offer their own EITC in addition to the federal credit. Some states mirror the federal credit closely, while others have different income limits or credit amounts. A few states offer a credit even if you do not have may have access to children, whereas the federal credit for childless workers is much smaller.

To claim a state EITC, you file your state income tax return and report the same information you reported to the IRS. Some states automatically calculate the credit if you are may be able to access; others require you to claim it on a separate form or schedule. Check your state's tax authority website or ask a tax preparer whether your state offers an EITC and how to claim it.

The state credit is separate from the federal credit, so you receive both if you are may be able to access for both. A state EITC can add several hundred dollars to your refund depending on your income and the state where you live.

Common Mistakes and What to Avoid

One frequent error is claiming a child who does not meet the relationship or residency test. The child must live with you for more than half the year, and the relationship must be one the IRS recognizes. A niece or nephew does not count unless they are your sibling's child and you are raising them.

Another mistake is not filing a return at all because you think your income is too low. If you might be may be able to access for the EITC, you should file even if no tax is owed. The credit is only paid if you file and claim it.

A third common issue is claiming the same child on two returns. If you and another person both file claiming the same child, the IRS will disallow one claim and may assess penalties. If you are unsure who should claim the child, resolve it before filing.

Frequently Asked Questions

Can I get the EITC if I am self-employed?

Yes. Self-employment income counts as earned income for EITC purposes. You report your net self-employment income on Schedule C and use that figure to determine your credit amount. You must still meet the income limits and other requirements.

What happens if I claim the EITC and the IRS says I was not may be able to access?

The IRS will send you a notice explaining why the credit was disallowed and ask you to repay it. You have the right to respond and provide additional information if you believe the IRS made an error. If you disagree with the decision, you can request an appeal through the IRS Office of Appeals.

Do I lose other benefits if I receive an EITC refund?

An EITC refund does not count as income for most means-tested programs like SNAP or Medicaid. However, some programs may count it as a resource if you have not spent it by the time they review your case. Check with the specific program to understand how it treats tax refunds.

Can I claim the EITC if I did not work the entire year?

Yes, as long as you had some earned income during the year. The credit is based on your total earned income for the year, so even a few months of work can make you may be able to access if your income is low enough.

Is there a difference between the EITC and the Child Tax Credit?

Yes. The EITC is for low to moderate-income workers and is refundable. The Child Tax Credit is a separate credit for families with children and has different income limits and rules. You can claim both credits in the same year if you meet the requirements for each.