Earned Income Tax Credit (EITC): who it helps and how

Find out about the Earned Income Tax Credit, a government program that assists low wages workers. Understand the eligibility requirements and how to claim your refunds. Keep reading!


Earned Income Tax Credit (EITC): the welfare program that helps low-income families make ends meet

EITC Earned income tax credit calculations on the page.
Learn how EITC works. Keep reading! Source: Adobe Stock

The Earned Income Tax Credit (EITC) is a welfare program that helps individuals and families of the U.S.A who do not earn much money get a tax break.

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This post will help you understand EITC better,  the eligibility requirements, and how much money you can get from it. Keep reading to learn more.

What is the Earned Income Tax Credit?

Legal concept meaning What Is the Earned Income Tax Credit? with phrase on the page.
Find out what Earned Income Credit is. Keep reading! Source: Adobe Stock

The Earned Income Tax Credit, also known as EITC, is an American governmental tax credit that can reduce or reimburse the federal taxes you owe.

The most important requirement to receive it is that your income should come from a working source.

So, whether you are single or married, have children or not, you can still qualify for EITC. Also, it is made for low- and moderate-income working individuals and families.

The credit aims to supplement the wages of underpaid workers and encourage the workforce by making it more financially rewarding.

Then you may use it to lower your tax payments and perhaps increase your refund if you qualify.


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What are the benefits of receiving EITC?

The Earned Income Tax Credit is one of the most effective anti-poverty programs in the United States.

It has considerably reduced poverty and increased work participation among eligible taxpayers in the USA in the last few years.

That has been happening because this program aims to reward work. So as a benefit, it incentives hard work and low-salary individuals to work more hours.

Also, it helps families to increase their monthly budget. This extra money can be used to improve their quality of life in a number of different ways.

For example, they may be able to buy healthier food, make home requirements, and buy their cars.

In addition, it can help low-income families have a tax break or lower the taxes they own. Still, it can refund up to $6,935 (according to the Tax Year 2022).

Finally, it allows families to have a bit more financial breathing room and improve their overall standard of living.

How much money can you receive from the Earned Income Tax Credit?

The amount of money you can receive from the Earned Income Tax Credit depends on your income, family size, and marital status. Usually, the more extensive the family, the higher the credit will be.

However, even without children, eligible smaller working families can qualify for EITC and earn a smaller credit, too.

Also, The Income Tax Credit changes from year to year, so it’s important to be attentive to the current tax funds. In 2022, the table released by EITC shows credit worth up to $6,935.

The credit amount goes up as you earn more money until it reaches a certain limit. After that, the credit amount gradually goes down.

The table below shows the amounts that low-income individuals and families can receive based on The maximum AGI (Adjusted Gross Income), Investment Income, and Credit amounts.

Number of children or relativesSingle, Head of Household, or WidowedMarried 
Year Tax 2022 (available on IRS website)

The Investment Income limit is no more than $10,300.

And the maximum amount of credit is $560 for non-qualifying children, $3,733 for 1 qualifying child, $6,164 for 2 qualifying children, and $6,935 for three or more.

Who is eligible for the EITC program

Earned income tax credit form. Tax credit, deduction and tax ret
Find out if you’re eligible for EITC. Read on! Source: Adobe Stock

Low-income workers may qualify if they attend to these fundamental qualification requirements for EITC:

  • You need to be an American citizen or an authorized resident;
  • You must have worked and received less than $57,414 in income (according to the Tax Year 2021);
  • You need to have a valid Social Security number;
  • You must have under $10,000 investment income in the tax year of 2021.

About the Marital Status, according to the year 2021, you can qualify for EITC if you are:

  • Head of the house;
  • Qualifying widow or widower;
  • Married (filing jointly and separately);
  • Single.

If you apply separately, even being married, make sure you have a qualifying child that has been living with you for more than half of 2021.

Still, you can claim the EITC if you haven’t lived together with your partner for the last 6 months or are legally separated by the laws of your state.

Also, it’s important to know that special rules may apply if one of the spouses isn’t a resident alien.

In case you still have doubts about your profile, you can use the EITC Qualification Assistant to help you. It’s available on their website.

There are also special qualifying rules for military members, taxpayers and disabled family members, and clergy members.

So, you’d better check them out at the official EITC website.

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How can you claim the EITC on your taxes?

There are a few things you need to do to claim the Earned Income Tax Credit (EITC).

First, you must qualify. To do this, you must meet certain requirements regarding your income, filing status, and the number of dependents.

Second, you must file a federal tax return. This is even if you don’t owe any tax or are due a refund.

After that, one easy way to track your refund is the IRS2Go mobile app.

It can be a very effective tool because you may have to wait a bit longer for your tax refund if you claim the Earned Income Tax Credit.

That’s because, by law, the IRS can’t issue refunds for taxpayers claiming the EITC until mid-February.

According to the IRS, you have three years from the due date of your tax return to file and claim a refund.

So, if you’re owed a refund for 2019, you’ll need to file your return no later than April 2023. You can do that by submitting a form.

That said, make sure you read the fine print and the details about the requirements to claim your refunds and eligibility for this welfare program.

We hope this article has helped you understand what the Earned Income Tax Credit is, as well as its benefits and how it can help you have more life quality.

Moreover, if you need to keep taking care of your finances the best way possible, check out our post below to learn how to create an easy budget!

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How to create an easy budget plan in 5 steps

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About the author  /  Suzana Brito

I'm a Language Studies graduate and have always been interested in writing and sharing knowledge. By creating content about finances and related products, I believe in contributing to people achieving financial freedom and their goals in life.

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