What the Earned Income Credit Is

The Earned Income Credit (also called the Earned Income Tax Credit or EITC) is a federal tax credit that reduces the amount of income tax you owe, or increases your refund, 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, the IRS sends you the difference as a refund.

The credit is designed to support working people with low to moderate income. You do not receive money upfront—instead, you claim it when you file your federal income tax return, usually between January and April. The amount you receive depends on your income, filing status, and whether you have children.

Key Takeaways

  • The Earned Income Credit is a tax credit you claim on your federal return that can reduce what you owe or increase your refund if you work and earn below the income limit.
  • The credit amount phases in as your income rises, reaches a maximum, then phases out at higher income levels—so the benefit is largest for people earning roughly $15,000 to $35,000 per year, depending on family size.
  • You must have earned income from work (wages, self-employment, or farm income) to claim the credit; investment income or unemployment benefits do not count.
  • The IRS sets new income limits and credit amounts each year, so you should check the current year's rules before filing.
  • You claim the credit by filing a federal tax return, even if you normally would not have to file one.

How Income Limits and Credit Amounts Work

The credit is structured in three phases: it grows as your income rises, holds steady at a maximum amount, then shrinks as income goes higher. The exact income limits and maximum credit amounts change each year because they are adjusted for inflation.

For the 2023 tax year (filed in 2024), the maximum credit ranged from about $560 for workers without children to about $3,995 for workers with three or more children. The income limit to claim any credit at all was roughly $59,000 for single filers and $63,000 for married couples filing jointly, though these numbers vary by family size. You can find the current year's limits on the IRS website or in the instructions that come with the tax forms.

The reason the credit shrinks at higher incomes is intentional: it is designed to help people who are working but earning modest wages, not to benefit higher earners. If your income climbs above the phase-out range, you lose the credit entirely.

Who Can Claim the Earned Income Credit

To claim the credit, you must have earned income from work. This includes wages from a job, net self-employment income, or farm income. Income from unemployment benefits, Social Security, pensions, or investments does not count as earned income and will not help you claim the credit.

You must also meet age and residency rules. If you do not have children, you generally must be between 25 and 64 years old and a U.S. citizen or resident alien for the entire tax year. If you have children, the age rule does not explore, but the children must be your biological children, stepchildren, or adopted children, and they must live with you for more than half the year.

You cannot claim the credit if your investment income (interest, dividends, capital gains) exceeds a certain amount in that tax year. For 2023, that limit was $11,000. If you have significant investment income, you may not be able to claim the credit even if your earned income is low.

How to Claim the Credit on Your Tax Return

You claim the Earned Income Credit by filing a federal income tax return with the IRS, even if you do not normally have to file one because your income is too low. You will need to fill out Schedule EIC (if you have children) or straightforward claim the credit on your main tax form.

If you file on paper, you use Form 1040 or Form 1040-SR and attach Schedule EIC. If you file electronically using tax software, the software will ask you questions about your income, filing status, and children, then calculate the credit for you automatically. Many tax software companies offer free filing for low-income taxpayers through the IRS Free File program.

You will need your Social Security number, your spouse's number (if filing jointly), and the Social Security numbers of any children you are claiming. You will also need to report your earned income accurately, so keep pay stubs or other income records.

The Difference Between the Federal and State Credits

The Earned Income Credit exists at the federal level, but some states also offer their own earned income credits that work similarly. A state credit is separate from the federal one—you claim both on your return if you live in a state that offers it.

State credits vary widely. Some states offer a credit equal to a percentage of the federal credit (for example, 20% of what you receive federally), while others have their own income limits and amounts. A few states do not offer an earned income credit at all. You can find out whether your state has one by checking your state's tax authority website or asking a tax preparer.

What Happens After You Claim the Credit

Once you file your return claiming the Earned Income Credit, the IRS processes it like any other return. If you are owed a refund that includes the credit, the IRS will send it to you by mail or direct deposit, usually within 21 days of accepting your return if you filed electronically.

The IRS does verify Earned Income Credit claims, especially those involving children. If the IRS has questions about your return, it may contact you to confirm that your children meet the residency and relationship rules, or to verify your income. Keeping records of your pay stubs, lease or mortgage documents, and children's birth certificates makes it easier to respond if the IRS asks.

If you received a credit in error—for example, because your income was actually higher than you reported—the IRS will ask you to repay it. This is why reporting your income accurately is important.

Frequently Asked Questions

Do I have to file a tax return to get the Earned Income Credit?

Yes. You must file a federal income tax return to claim the credit, even if your income is so low that you would not normally have to file. The IRS does not send the credit to you automatically—you have to report it on your return.

Can I get the Earned Income Credit if I am self-employed?

Yes. Self-employment income counts as earned income. You will need to report your net self-employment income (income minus business expenses) on Schedule C, then claim the credit on your main return. Keep records of your income and expenses to support what you report.

What if I have a child but do not know their father's Social Security number?

You can still claim the credit with your child's Social Security number alone. You do not need the other parent's information. However, you must be able to prove the child lived with you for more than half the year if the IRS asks.

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

Generally, no. If you are married, you must file a joint return to claim the Earned Income Credit. Filing separately disqualifies you from the credit in most cases, even if your spouse has no income.

What if my income changes during the year?

You claim the credit based on your total earned income for the entire tax year, not what you earned in any single month. If you had a job early in the year and then lost it, you still count all the income you earned while working. Report your actual year-end income on your return.