what is the earned income tax credit eitc 
the earned income tax credit eitc is a refundable tax credit that helps certain u s taxpayers with low earnings by reducing the amount of tax owed on a dollar for dollar basis taxpayers may be eligible for refunds if their tax credit exceeds their tax liability for the year understanding the earned income tax credit eitc the earned income tax credit eitc also called the earned income credit eic was conceived as a work bonus plan to supplement the wages of low income workers and help offset the effect of social security taxes it continues to be viewed as an anti poverty tax benefit the eitc is available only to taxpayers with low or moderate earnings whether or not they have qualifying dependents to claim the credit an individual taxpayer or if the taxpayer is married the individual or their spouse filing jointly with no qualifying dependents must be at least 19 years old and must live in the united states for more than half of the tax year 1the credit percentage earnings cap and credit amount vary according to a taxpayer s filing status and number of dependents qualifying dependents which can include dependent children who are under age 19 students under age 24 or dependents with a disability these factors also determine the income phaseout range over which the credit diminishes to zero no credit is allowed above the ceiling for the phaseout range 2to be eligible for the eitc a taxpayer must have earnings but cannot have investment income in excess of a specified level for 2023 the maximum level of investment income was set at 11 000 increasing to 11 600 in 2024 13 age relationship and residency requirements also apply with respect to qualifying dependents the credit reduces the amount of tax owed on a dollar for dollar basis if the amount of the eitc is greater than the amount of tax owed by a taxpayer then the taxpayer may be eligible for a refund 4the eitc is one of the most important tax credits available to individual taxpayers the taxpayer must be a u s citizen or a resident alien for the entire year and have a valid social security number by the tax return s due date the amount of credit that can be claimed on a tax return depends on the taxpayer s annual earned income for the tax year filing status and number of qualified dependents 2if you qualify for the eitc you may or may also be eligible for the child tax credit child and dependent care credit or education credits 4example of the eitca refundable tax credit reduces the value of a taxpayer s liability dollar for dollar and results in a refund if the liability is reduced below zero for example an individual who has a tax bill of 2 900 and can claim a 529 credit will owe 2 371 2 900 529 2 371 that lower amount is the total that the taxpayer must pay to the internal revenue service irs for the year if a taxpayer has a total tax liability of 1 000 and a credit of 1 500 then the taxpayer should be entitled to a refund of 500 qualifying for the eitcto qualify for the eitc a taxpayer s earned income and adjusted gross income agi must be below certain income limits the limits on the income level credit amount and investment income for a single or married taxpayer vary depending on the number of qualifying dependents in the household for the 2023 tax year those limits were as follows with 2024 figures updated in the table below as well 53the irs has posted an eitc calculator the eitc calculator helps determine eligibility for the credit and provides an estimate of the credit amount to use the calculator you can input information about your income qualifying children or relatives filing status and relevant financial documents such as w 2s and 1099s you ll also need to include details about taxes withheld or money received as well as any relevant expenses or income adjustments note that the calculator should be used for estimation purposes only and does not implicitly mean you will get the credit 6 taxpayers who claim the eitc under married filing separately must meet the eligibility requirements under the special rule in the american rescue plan act arpa of 2021 7taxpayers who are married filing separately can qualify for this credit provided that they meet the eligibility requirements under the arpa the tax law provides special eitc rules for clergy and members of the military stationed abroad and specific rules coordinating the credit with the tax laws applicable in puerto rico guam and american samoa 2