The Earned Income Tax Credit: A Valuable Credit for Low Income Earners

The "Earned Income Tax Credit" (EITC) is money the federal government provides to low-income working people to help them make ends meet. The EITC is a refundable credit, which means you can collect it even if you don't owe any federal income tax. It's free money from the federal government.

The IRS administers the EITC, but you don't have to owe or pay any federal income taxes to qualify for it. But to get the credit, you need to file a tax return and specifically claim the EITC. Many people who qualify for the EITC don't receive it because they fail to file.

Who Qualifies for the EITC?

To qualify for the EITC, you must:

• have a valid Social Security number
• be at least 25 years old
• be under 65 years old
• live in the United States for at least half the year
• not be someone else's dependent or child for EITC purposes, and
• have at least $1 of earned income—such as wages, tips, or income from running a business—but not too much of it.

The income limit depends on your family size. The more "qualifying children" you have, the larger your income may be for qualifying purposes. A qualifying child can include your son, daughter, adopted child, stepchild, foster child, or a descendant of any of them, such as your grandchild, or your brother, sister, half-brother, half-sister, stepbrother, step-sister, or a descendant of any of them, like a niece or nephew. The child must live with you at least half the year and be younger than 19 (24 if a full-time student).

For 2023 (the tax return you'll file in 2024), you qualify for the credit if your earned income is less than:

• $17,640 ($24,210 if married filing jointly) with no qualifying children ($16,480 and $22,610 in 2022)
• $46,560 ($53,120 married filing jointly) with one qualifying child ($43,492 and $49,622 in 2022)
• $52,918 ($59,478 if married filing jointly) with two qualifying children ($49,399 and $55,529 in 2022), or
• $56,838 ($63,698 if married filing jointly) with three or more qualifying children ($53,057 and $59,187 in 2022).

If you haven't filed a tax return to claim your 2022 EITC, you must do so by October 15, 2023. If you already filed your 2022 return, you can file an amended return to claim the EITC.

Check the IRS website for the annually adjusted amounts.

If you have income other than earned income, such as unemployment payments, taxable Social Security payments, alimony, investment income (which can't exceed $11,000 for 2023 ), or retirement benefits, you must add it toward the limit. You need not add government assistance you receive, such as food stamps, Medicaid, or Supplemental Security Income (SSI).

The IRS has an EITC Assistant tool on its website that you can use to see if you qualify.

How Much Can You Get?

The amount of your credit depends on your income. It can be as much as $6,728 for 2023. The maximum credits for 2023 are:

• $600 with no qualifying children ($560 in 2022)
• $3,995 with one qualifying child ($3,733 in 2022)
• $6,604 with two qualifying children ($6,164 in 2022), or
• $7,430 with three or more qualifying children ($6,935 in 2022).

If you owe any taxes for the year, your credit will first be subtracted from this amount, and the rest will be paid directly to you. If you owe no taxes, you'll be paid the full amount of the credit. Some workers have their credits prepaid through their employers as "negative withholding" from their paychecks.

The IRS online EITC Assistant can tell you how much you qualify for. If you don't want to go online, the instructions for Form 1040, 1040A, and 1040EZ contain a worksheet and earned income credit table you can use to determine the amount of the credit.

How to Apply for EITC

To claim the EITC, you must file an IRS income tax form, either: Form 1040, 1040A, or 1040EZ. If you have one or more qualifying children, you must complete Schedule EIC and attach it to your tax return. Schedule EIC provides the IRS with information about the qualifying children, including their names, ages, Social Security numbers, relationship to you, and the amount of time they lived with you during the year.

More than half the people who qualify for the EITC use a tax preparer to prepare their returns. You can use a paid preparer—many preparers will deduct their fee from your EITC payments rather than make you pay upfront.

However, if you qualify for the EITC, you probably also qualify for free tax preparation through the IRS Volunteer Income Tax Assistance program (VITA). The VITA Program offers free tax help from IRS-certified volunteers. There are thousands of VITA sites located at community and neighborhood centers, libraries, schools, shopping malls, and other locations. To find a site, use the online VITA Locator Tool or call 800-906-9887.

You can get more information on claiming EITC at the IRS website.