Financial Tip #4: Earned Income Tax Credit

About EITC

The Earned Income Tax Credit (or EITC) is a federal income tax credit specifically for low-income working families. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

Overview of EITC

Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file.

Many families who receive this credit use it to pay living expenses and to save for future needs. Individuals do not need to have children to claim EITC. Generally, income and family size determine a taxpayer's eligibility and the EITC amount a taxpayer can receive. The maximum amount of the credit for Tax Year 2011 is $5,751.

EITC Income Limits and Maximum Credit Amounts

Income and family size determine the amount of the EITC. The income amounts and the amount of EITC are adjusted for inflation each year. See 2011 amounts here or refer to the income limits, maximum credit amounts and tax law updates page on the Internal Revenue Service (IRS) website for additional years and information. The Earned Income Credit Table, which shows the credit amounts, is included in the Instruction booklets for the Form 1040 series and in Publication 596, Earned Income Credit.

More About EITC

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For more in-depth information about EITC and the eligibility requirements see: