The Earned Income Tax Credit is a refund you may receive from the IRS if you work and earn below a certain income level
The Earned Income Tax Credit (EITC) is a tax break for working people with low to moderate income. Unlike most tax credits that straightforward reduce what you owe, the EITC can result in a refund — meaning you get money back even if you owe nothing. The IRS administers it, and you claim it when you file your tax return.
The credit is designed to put money in the pockets of people who work but don't earn much. A single person with no children might receive a few hundred dollars. A parent with two children could receive several thousand. The exact amount depends on your income, filing status, and how many children you claim.
You do not have to be in debt or behind on bills to receive it. You straightforward have to work, file a tax return, and meet the income limits for your situation. Many people who are may have access to to the EITC never claim it because they don't know it exists or think they don't may have access to.
Key Takeaways
- The EITC is a refundable tax credit, meaning you can receive money back from the IRS even if you owe no taxes.
- You must have earned income from work and fall below specific income limits that vary by filing status and number of children.
- The credit amount increases as your income rises up to a certain point, then decreases as you earn more.
- You claim the EITC by filing a tax return with the IRS, either on your own or with help from a free tax preparation service.
Income limits and credit amounts vary by your family situation
The IRS sets different income limits and maximum credit amounts depending on whether you file as single, married filing jointly, or head of household, and how many children you claim. A single person with no children has a lower income limit and smaller maximum credit than a married couple with three children.
For the 2023 tax year (filed in 2024), a single person with no children could earn up to roughly $16,000 and still receive a small credit. A married couple filing jointly with one child could earn up to roughly $46,000. A married couple with three children could earn up to roughly $56,000. These numbers change each year because the IRS adjusts them for inflation.
The credit does not increase steadily as your income goes up. Instead, it grows as you earn more, reaches a peak at a certain income level, then shrinks as you earn even more. This means two people with different incomes might receive the same credit amount, or a person earning slightly more might actually receive less.
You must have earned income from work to claim the credit
The EITC requires that you have earned income — money you made from working. This includes wages from a job, self-employment income, or tips. It does not include unemployment benefits, Social Security, disability payments, child support, or investment income.
You must also have a valid Social Security number and be a U.S. citizen or resident alien. If you claim children on the credit, they must also have valid Social Security numbers and meet relationship, age, and residency tests.
If you are self-employed, you can still claim the EITC. Your net self-employment income counts as earned income, even if you operate your business part-time or from home.
How the credit amount is calculated
The IRS uses a formula based on your earned income, filing status, and number of children. The credit starts at zero when your income is zero, then increases by a set percentage for every dollar you earn — up to a maximum amount. Once you reach a certain income level, the credit begins to decrease by a smaller percentage for every additional dollar you earn, until it reaches zero.
For example, a single parent with one child might see their credit increase by 34 cents for every dollar earned, up to a maximum of roughly $3,900. After hitting that peak at a certain income, the credit then decreases by 16 cents for every dollar earned above that point. The exact percentages and peak income levels differ for each filing category.
You do not calculate this yourself. When you file your tax return, you enter your income and the number of children you claim, and the tax software or tax preparer applies the IRS formula to determine your credit.
How to claim the EITC on your tax return
You claim the EITC by filing a federal tax return with the IRS. If you file electronically, you complete Schedule EIC (Earned Income Credit) or enter the information directly into the tax software. If you file on paper, you attach Schedule EIC to Form 1040.
You can file on your own using tax software, or you can use a free tax preparation service. The IRS offers the Free File program, which provides free tax software to people earning below a certain income threshold. Many nonprofits and community organizations also offer free tax preparation through the Volunteer Income Tax information (VITA) program.
If you do not normally file a tax return because your income is too low, you should still file to claim the EITC. Filing is the only way to receive the credit. You cannot claim it on a separate form or through any other process.
The difference between refundable and nonrefundable credits
Most tax credits are nonrefundable, meaning they can reduce your tax bill to zero but cannot result in a refund. If the credit is larger than what you owe, you straightforward lose the extra amount.
The EITC is refundable, which means if the credit is larger than your tax bill, the IRS sends you the difference as a refund. This is why the EITC can put money in your pocket even if you earned so little that you owe no federal income tax at all. For many low-income workers, the EITC refund is larger than any other tax benefit they receive.
State and local EITC programs may offer additional money
In addition to the federal EITC, some states and cities offer their own earned income credits. These work similarly to the federal credit but are based on state or local tax returns. A few states offer credits that are a percentage of the federal EITC — for example, 20 percent of whatever you receive from the IRS.
Not all states have an EITC program. If your state does, you claim it on your state tax return at the same time you claim the federal credit. The state credit is separate money and can add several hundred dollars to your total refund.
To find out whether your state offers an EITC, check your state's tax agency website or ask a tax preparer. The IRS website also lists which states have programs.
Frequently Asked Questions
Do I have to have children to claim the EITC?
No. Single people and married couples with no children can claim the EITC if their income is low enough, but the credit amount is smaller than for people with children. A single person with no children can receive a maximum of a few hundred dollars, while a parent with children can receive several thousand.
What happens if I claim the EITC and the IRS says I made a mistake?
The IRS may contact you to verify your income, filing status, or children. If they find an error, you may have to repay part or all of the credit. This is why it is important to keep records of your income and documents proving your children's relationship to you, such as birth certificates.
Can I claim the EITC if I am self-employed?
Yes. Your net self-employment income counts as earned income for the EITC. You must file Schedule C or Schedule C-EZ with your tax return to report your business income, and then claim the credit on Schedule EIC.
What if my income changes during the year?
You claim the EITC based on your total earned income for the entire year, not what you earned in any single month. If you earned less than expected, you may receive a larger credit when you file. If you earned more, your credit may be smaller or zero.
Is the EITC the same as the Child Tax Credit?
No. The EITC is based on your earned income and is refundable. The Child Tax Credit is a separate credit based on the number of children you claim and has different income limits and rules. You can claim both credits on the same return if you meet the requirements for each.