Earned Income Credit (EITC)

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC or EIC) is a refundable federal tax credit for low- and moderate-income working taxpayers. It reduces tax liability dollar for dollar and can produce a refund if the credit exceeds taxes owed.

How the EITC works

• Refundable credit: lowers tax owed; if the credit exceeds liability, you may receive the difference as a refund.
• Amount depends on earned income, filing status, and number of qualifying children.
• Claimants must have a valid Social Security number and be a U.S. citizen or resident alien for the entire year.

Example: If you owe $2,900 in taxes and claim a $529 EITC, your tax due becomes $2,371. If your tax liability is $1,000 and your credit is $1,500, you’d receive a $500 refund.

Who qualifies

Basic eligibility requirements:
* Earned income and adjusted gross income (AGI) below IRS thresholds for the tax year.
Valid Social Security number by the return due date.
At least 19 years old (special rules can apply for students, members of the military, clergy, and certain other situations).
Must live in the United States for more than half the tax year.
Investment income must be below the IRS limit for the year.

Qualifying children rules:
* Children can qualify if they meet age and relationship tests—typically under 19, under 24 if a student, or any age if permanently and totally disabled. The number of qualifying children affects the credit amount and phaseout ranges.

Special cases:
* Married filing separately: special rule under the American Rescue Plan Act of 2021 can allow qualification in limited circumstances.
* There are additional rules for military personnel stationed abroad and specific U.S. territories.

Key limits (selected tax years)

• Maximum EITC for taxpayers with three or more children:
• 2024 tax year: $7,830
• 2025 tax year: $8,048
• Maximum investment income:
• 2024 tax year: $11,600
• 2025 tax year: $11,950

(Income thresholds and exact credit amounts vary by filing status and number of qualifying children; consult IRS tables or the EITC Assistant for precise limits.)

How to claim the EITC

• File Form 1040 or Form 1040-SR.
• If claiming with a qualifying child, include Schedule EIC.
• If you didn’t claim the EITC in a prior year when eligible, you generally have up to three years from the return due date to file and claim the credit (amend if you already filed).
• Use the IRS EITC Assistant or the IRS online tools to estimate eligibility and credit amount.

Refund timing:
* EITC and Additional Child Tax Credit (ACTC) refunds are subject to a statutory delay; the IRS cannot issue related refunds before mid-February. Most EITC/ACTC refunds are issued by early March if there are no other issues. Track refunds via the IRS “Where’s My Refund?” tool or the IRS2Go app.

Interaction with other credits

If eligible for the EITC, you may also qualify for other tax benefits such as:
* Child Tax Credit
Child and Dependent Care Credit
Education credits

Bottom line

The EITC is a significant refundable credit aimed at reducing poverty and rewarding work. Eligibility and the credit amount depend on earned income, filing status, and the number of qualifying children. For the most accurate determination of eligibility and credit amount, consult IRS guidance or use the IRS EITC Assistant.