	Introduction

The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers with relatively low earnings. Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefit. For tax year 2015 (returns filed in 2016), a total of $68.5 billion was claimed by 28.1 million tax filers, making the EITC the largest need-tested antipoverty cash assistance program. Under current law, the EITC is calculated based on a recipient's earned income, using one of eight different formulas, which vary depending on several factors, including the number of qualifying children a tax filer has (zero, one, two, or three or more) and his or her marital status (unmarried or married). 111-5 ), extended by P.L. 111-312 and P.L. 112-240 , and made permanent by the Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. The first modification was a larger credit for families with three or more children, while the second reduced the EITC's marriage penalty. 6. There is no age requirement for tax filers with qualifying children. Calculating the EITC

The EITC amount is based on formulas that consider earned income, number of qualifying children, marital status, and adjusted gross income (AGI). In general, the EITC equals a fixed percentage (the "credit rate") of earned income until the credit reaches its maximum amount. The EITC then remains at its maximum level over a subsequent range of earned income, between the "earned income amount" and the "phase-out amount threshold." Finally, the credit gradually decreases in value to zero at a fixed rate (the "phase-out rate") for each additional dollar of earned income or AGI (whichever is greater) above the phase-out amount threshold. The specific values of these EITC parameters (e.g., credit rate, earned income amount, etc.) The $3,461 credit represents the maximum credit for a tax filer with one child in 2018. A tax filer can look up the correct amount of his or her EITC based on income, marital status, and number of qualifying children. Payment of the EITC

The EITC is provided to individuals and families annually in a lump sum payment after a taxpayer files a federal income tax return. It may be received in one of three ways: 
1. a reduction in federal tax liability; 2. a cash payment from the Treasury if the tax filer has no tax liability, through a tax refund check; or 3. a combination of reduced federal tax liability and a refund. Thus, payments are generally based on the prior year's income, earnings, and family composition. That is, the EITC earned in 2018, based on a tax filer's earnings, income, and family composition, will be paid in 2019. Treatment of the EITC for Need-Tested Benefit Programs

By law, the EITC cannot be counted as income in determining eligibility for, or the amount of, any federally funded public benefit program including Supplemental Nutrition Assistance Program (SNAP) food assistance, low-income housing, Medicaid, Supplemental Security Income (SSI), and Temporary Assistance for Needy Families (TANF). An EITC refund that is saved by the filer does not count against the resource limits of any federally funded public benefit program for 12 months after the refund is received. 114-113

Two temporary modifications to the EITC were enacted by the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) increased the amount of the credit by changing the credit formula. For 2015, 3% of all EITC dollars were claimed by tax filers with no qualifying children and 97% were claimed by tax filers with qualifying children. A greater share of returns filed in certain southern states claimed the EITC than returns in other regions of the country.
The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers earning relatively low wages. Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefit. Eligibility for and the amount of the EITC are based on a variety of factors, including residence and taxpayer ID requirements, the presence of qualifying children, age requirements for childless recipients, and the recipient's investment income and earned income. Tax filers with income above certain thresholds—these thresholds are based on marital status and number of qualifying children—are ineligible for the credit.
The EITC varies based on a recipient's earnings. Specifically, the EITC equals a fixed percentage (the "credit rate") of earned income until the credit amount reaches its maximum level. The EITC then remains at its maximum level over a subsequent range of earned income, between the "earned income amount" and the "phase-out amount threshold." Finally, the credit gradually decreases to zero at a fixed rate (the "phase-out rate") for each additional dollar of adjusted gross income (AGI) (or earned income, whichever is greater) above the phase-out amount threshold. The specific values of these EITC parameters (e.g., credit rate, earned income amount) vary depending on several factors, including the number of qualifying children a tax filer has and his or her marital status. For the 2018 tax year, the maximum EITC for a tax filer without children is $519 per year. In contrast, the 2018 maximum EITC for a tax filer with one child is $3,461 per year; for two children, $5,716 per year; and for three or more children, $6,431 per year.
Two temporary modifications to the EITC were enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), extended by P.L. 111-312 and P.L. 112-240, and made permanent by the Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113). The first modification was a larger credit for families with three or more children, while the second reduced the EITC's marriage penalty.
The EITC is provided to individuals and families once a year, in a lump sum payment after individuals and families file their federal income tax returns. The credit may be received in one of three ways: (1) a reduction in federal tax liability; (2) a refund from the Treasury if the tax filer has no income tax liability; or (3) a combination of a reduced federal tax liability and a refund. The amount of the credit a tax filer receives is based on the prior year's income, earnings, and family composition (marital status and number of qualifying children). That is, the EITC earned based on 2018 earned income will not be paid until 2019.
The EITC cannot be counted as income in determining eligibility for or the amount of any federally funded public benefit program. An EITC refund that is saved by a tax filer does not count against the resource limits of any federally funded public benefit program for 12 months after the refund is received.
For tax year 2015 (returns filed in 2016), a total of $68.5 billion was claimed by 28.1 million tax filers (19% of all tax filers), making the EITC the largest need-tested antipoverty cash assistance program. In that year, 97% of all EITC dollars were claimed by families with children. However, there was considerable variation in the share of returns claiming the EITC by state, with a greater share filed in certain southern states compared to other regions of the country.