What the Earned Income Tax Credit is

The Earned Income Tax Credit (EITC) is a tax credit for people who work but earn below a certain income level. Unlike a deduction, which reduces the income you report, a credit reduces the tax you owe dollar-for-dollar. If your credit is larger than the tax you owe, the IRS sends you the difference as a refund — this is called a refundable credit.

The EITC is designed to put money back in the pockets of working people with low to moderate income. You do not receive it as a separate payment during the year; instead, you claim it when you file your tax return, and the IRS processes it as part of your refund.

Key Takeaways

  • The EITC is a refundable tax credit that reduces your tax bill and can result in a refund if the credit exceeds what you owe.
  • You must have earned income from work and meet income limits that vary depending on your filing status and number of dependents.
  • The credit amount phases in as your income rises, reaches a maximum, then phases out at higher income levels.
  • You claim the EITC by filing a tax return with the IRS, even if you would not normally be required to file.
  • The IRS offers free tax preparation help through VITA sites and other programs if you need information filing.

Income limits and credit amounts

The EITC has income thresholds that change each year. Your income limit depends on your filing status (single, married filing jointly, or head of household) and whether you have dependents. For the 2023 tax year, the maximum credit ranges from around $600 for workers with no dependents to over $3,900 for workers with three or more dependents, but these amounts vary by year and your specific situation.

The credit does not work as a flat amount. Instead, it grows as your earned income increases, reaches a peak amount, and then shrinks as your income rises further. This means two people earning the same total income might receive different credit amounts depending on how much of that income came from work versus other sources.

You can find the exact income limits and credit amounts for your situation on the IRS website or by using the EITC interactive tool. The IRS updates these figures annually, so the numbers that applied last year may not explore this year.

Who can claim the EITC

To claim the EITC, you must have earned income from work — wages, salary, self-employment income, or similar earnings. You cannot claim it based on investment income, unemployment benefits, or Social Security. You must also be a U.S. citizen or resident alien for the entire tax year.

If you have dependents, they must meet specific requirements: they must be your child, stepchild, foster child, sibling, or descendant of any of these; they must live with you for more than half the year; they must be under age 17 (or any age if permanently disabled); and they must have a valid Social Security number. If you claim a dependent for the EITC, you cannot claim them as a dependent for any other tax credit in the same year.

Workers without dependents can also claim the EITC, but the income limits are lower and the maximum credit is smaller. You must be between ages 25 and 64 (with some exceptions for people with disabilities) and cannot be claimed as a dependent on someone else's return.

How to claim the EITC on your tax return

You claim the EITC by filing a federal income tax return with the IRS, even if your income is so low that you would not normally be required to file. You will need your Social Security number, your dependents' Social Security numbers (if you have them), and documentation of your earned income — typically a W-2 from your employer or records of self-employment income.

On your tax return, you will complete Schedule EIC (if you have dependents) or straightforward report the credit on Form 1040. The IRS provides worksheets to help you calculate the credit, or you can use tax software that does the calculation for you. If you file electronically, the software will check your information against IRS records to reduce errors.

You can file your return yourself using free software, work with a paid tax preparer, or use a free tax preparation site. The IRS's Volunteer Income Tax information (VITA) program offers free tax filing help at community centers, libraries, and other locations if you earn below a certain threshold.

What happens after you claim the EITC

After you file your return, the IRS processes your claim and either reduces your tax bill or sends you a refund. If you owe taxes and your EITC is larger than what you owe, the IRS refunds the difference to you. The refund is typically deposited into your bank account or sent by check, depending on how you filed.

The IRS may verify your information before processing your refund, especially if you claimed dependents or if your return contains certain combinations of credits. This verification can add time to your refund — sometimes several weeks or longer. You can check the status of your refund using the IRS's "Where's My Refund?" tool on their website.

Keep copies of your tax return and supporting documents for at least three years. The IRS may contact you to verify information you reported, and having your records ready makes the process faster.

The EITC and advance payments

In some years, the IRS has offered advance EITC payments, which send part of your expected credit to you during the year rather than waiting until you file your return. These are not permanent; they are offered only when Congress authorizes them. When advance payments are available, you can choose to receive them or wait and claim the full credit when you file.

If you receive advance payments and your income changes during the year, you may owe money back when you file your return. For this reason, some people choose not to take advance payments and instead claim the full credit at tax time. The choice depends on your situation and whether you expect your income to stay stable.

EITC and other tax credits or deductions

You can claim the EITC along with other tax credits, such as the Child Tax Credit or the Child and Dependent Care Credit, as long as you meet the requirements for each one. However, you cannot claim the same dependent for multiple credits — each dependent can be used for only one credit per year.

The EITC is separate from deductions like the standard deduction. You can claim both the EITC and the standard deduction on the same return. The EITC reduces your tax liability, while the standard deduction reduces your taxable income. They work together to lower your overall tax bill.

Frequently Asked Questions

Do I have to file a tax return to get the EITC?

Yes, you must file a federal income tax return to claim the EITC. Even if your income is below the filing requirement, you should file to receive the credit. The IRS does not automatically send you the EITC — you have to report it on your return.

What if I am self-employed?

Self-employed workers can claim the EITC if their net self-employment income falls within the income limits. You will need to report your income on Schedule C and then claim the EITC on your return. Self-employment income counts as earned income for EITC purposes.

Can I claim the EITC if I am married but file separately?

No, you cannot claim the EITC if you are married and file a separate return. You must file jointly with your spouse to be may be able to access. This is one of the few situations where the IRS requires married couples to file together to receive a specific credit.

What if the IRS says I claimed the EITC incorrectly?

If the IRS finds an error on your return, they will contact you by mail. You will have a chance to respond and provide documentation to support your claim. If you disagree with their decision, you can appeal through the IRS dispute process. Keep all documents related to your dependents and income to support your claim.

Does claiming the EITC affect other benefits I receive?

The EITC generally does not affect means-tested benefits like Medicaid or SNAP (food information), because these programs look at your income, not your tax credits. However, some state programs may treat the EITC differently, so check with your state's benefit office if you receive information.