What the Earned Income Tax Credit Is

The Earned Income Tax Credit (EITC) is a federal tax credit that reduces the amount of income tax you owe if you work and earn below a certain income threshold. Unlike a deduction, which lowers your taxable income, a credit directly reduces your tax bill dollar for dollar. If the credit is larger than the tax you owe, you receive the difference as a refund—this is called a refundable credit.

The EITC is designed to support working people with low to moderate incomes. The amount you can claim depends on how much you earned, your filing status, and whether you have children. The credit phases in as your income rises, reaches a maximum amount, then phases out at higher income levels.

Key Takeaways

  • The EITC is a refundable tax credit that can reduce your tax bill to zero and send you a refund if you work and earn below income limits that vary by filing status and number of children.
  • You must have earned income from a job or self-employment to claim the EITC; investment income, unemployment benefits, and Social Security do not count.
  • The IRS sets different income limits and maximum credit amounts each year, and these change based on inflation and whether you have dependents.
  • You claim the EITC on your federal tax return using Form 1040 and Schedule EIC, or through tax software that walks you through the questions.
  • Many people miss out on the EITC because they do not file a tax return when they think they owe nothing, so filing is the only way to receive it.

Income Limits and Credit Amounts Change Each Year

The IRS adjusts the EITC income limits and maximum credit amounts annually for inflation. For the 2024 tax year, the income thresholds and credit amounts are different from 2023, and they will shift again in 2025. Because these numbers change, you cannot assume your may be able to access based on a previous year.

The credit is larger if you have children. A single filer with no children has a much lower maximum credit than a single filer with three children. Your filing status—single, married filing jointly, head of household—also affects your income limits. The IRS publishes updated tables each January on its website, and tax software automatically uses the correct year's numbers when you enter your income.

What Counts as Earned Income

Earned income means money you receive from working. This includes wages from a job, tips, and net profit from self-employment. It does not include investment income, interest, dividends, rental income, unemployment benefits, Social Security, disability payments, or workers' compensation.

If you are self-employed, your earned income is your net profit after business expenses. If you had a loss in your business, that loss does not count as earned income for EITC purposes. You must have at least $1 of earned income in the tax year to claim the credit.

How to Claim the EITC on Your Tax Return

You claim the EITC by filing a federal tax return, even if you do not owe any tax. You cannot receive the credit without filing. On your return, you use Form 1040 (the main individual income tax form) and Schedule EIC, which is a worksheet that calculates your credit based on your income and family situation.

If you use tax software—such as the IRS Free File program, TurboTax, H&R Block, or TaxAct—the software asks you questions about your income, filing status, and dependents, then automatically calculates whether you may have access to and how much the credit is. You do not have to fill out Schedule EIC by hand if the software does it for you. If you file with a tax professional, they will handle the EITC calculation as part of preparing your return.

You must file your return by the tax important date (usually April 15) or request an extension to claim the EITC for that year. The IRS will not send you the credit automatically; filing is the only way to receive it.

Special Rules for People With Children

If you have children, the EITC is larger, and the income limits are higher. The IRS defines a may have access to child as someone under age 17 at the end of the tax year, related to you by blood or adoption, living with you for more than half the year, and claimed as your dependent on your tax return.

You must provide the child's Social Security number on your return. The child cannot be claimed as a dependent by anyone else. If you share custody of a child, only one parent can claim the child as a dependent and receive the EITC for that child in a given year. The IRS has specific rules about which parent can claim the child; generally, the parent with whom the child lives for the longer part of the year has the right to claim them.

What Happens if You Receive the Credit and Your Income Changes

If you received an EITC refund based on your 2024 income, but your 2025 income is higher, you do not have to repay the 2024 credit. Each year's credit is separate and based only on that year's income. However, if you received an advance EITC payment from your employer during the year (a rare option), you may owe back some of that advance when you file your return.

If you think you might have received too much credit because your income was reported incorrectly, contact the IRS or a tax professional to review your return. The IRS can audit EITC claims, and if it finds an error, you may owe the credit back.

Where to File Your Return and Get Help

You can file your federal tax return online using IRS Free File (if your income is below the threshold), through commercial tax software, by mail, or with a tax professional. The IRS Free File program is available to people whose income falls below a certain level each year; you can find the current threshold and a list of participating software on the IRS website.

If you need help understanding whether you may have access to for the EITC or how to file, the IRS Volunteer Income Tax information (VITA) program offers free tax preparation at community centers, libraries, and nonprofits. You can find a VITA site near you through the IRS locator tool. Many nonprofits and community action agencies also offer free or low-cost tax preparation and can answer questions about the EITC.

Frequently Asked Questions

Can I claim the EITC if I am self-employed?

Yes. Your earned income is your net profit from self-employment after you subtract business expenses. You report this on Schedule C (Profit or Loss from Business) and then use that net profit to calculate your EITC on Schedule EIC. You must have at least $1 of net self-employment income to claim the credit.

What if I did not file a tax return last year because I thought I did not owe anything?

You may have been able to claim the EITC without owing tax. You can file a return for prior years to claim the credit. Generally, you can file back returns for up to three years and receive a refund. Contact the IRS or a tax professional to learn whether you can still file for earlier years.

Do I have to report the EITC refund as income next year?

No. The EITC refund is not considered income for tax purposes. It does not affect your income for the next year's EITC calculation or for other programs that use income limits, though some government programs may count it differently—check with the specific program if you are unsure.

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

No. You must file as married filing jointly to claim the EITC if you are married. If you file as married filing separately, neither spouse can claim the credit. This is one of the few tax situations where filing separately costs you money.

What if the IRS says I claimed the EITC incorrectly?

The IRS will send you a notice explaining the error and how much you owe back. You have the right to respond to the notice and provide documentation if you believe the IRS made a mistake. If you cannot pay the amount owed, you can set up a payment plan with the IRS or request an offer in compromise if you are in financial hardship.