Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC), sometimes called the Earned Income
Credit (EIC), is a refundable federal income tax credit for low-income working individuals and families. Congress originally
approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive
to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the
credit. The maximum credit is about $5650.
To qualify, taxpayers must meet certain requirements and file a tax
return, even if they did not earn enough money to be obligated to file a tax return.
The EITC has no effect on certain welfare
benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income
(SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments.
Taxpayers
must file individually, married filing jointly, or head of household to qualify (not married filing separately). The credit
is phased out at income levels of about $43,280 (for taxpayers with three or more qualifying children) or $13,440 (for individuals
with no children).
