What the Earned Income Tax Credit Is

The Earned Income Tax Credit (EITC) is a tax benefit for people who work but earn a low to moderate income. Instead of owing money when you file your taxes, you may receive money back — sometimes more than the taxes you paid in. The credit is designed to reduce the tax burden on working people and families, and in many cases it puts cash in your pocket.

The EITC is administered by the Internal Revenue Service (IRS) and is claimed when you file your federal income tax return. You do not need to have taxes withheld from your paycheck to claim it, and you do not need to owe taxes to receive the credit. The amount you receive depends on your income, your filing status, and whether you have children.

Key Takeaways

  • The EITC is a refundable tax credit that can result in a payment to you even if you owe no taxes, and the amount depends on your income and family situation.
  • You claim the EITC by filing a federal tax return with the IRS, using either Form 1040 with Schedule EIC or Form 1040-SR depending on your age.
  • Income limits vary by filing status and number of children, and your income must fall within the range set by the IRS for the tax year you are filing.
  • The IRS offers free tax filing tools and community organizations offer free help preparing your return if you cannot afford to pay a tax preparer.

Income Limits and Who Can Claim the Credit

Your income must fall within a specific range to claim the EITC. The limits change each year and depend on whether you file as single, head of household, or married filing jointly, and on how many children you claim. For the 2023 tax year (filed in 2024), the maximum income for a single filer with no children is around $16,810, while a married couple filing jointly with three or more children can earn up to around $56,838. These numbers increase slightly each year.

You must also have earned income from work — either as an employee receiving wages or as someone who is self-employed. Income from investments, unemployment benefits, or Social Security does not count toward the EITC. If you are married filing jointly, both spouses do not need to have earned income, but at least one must.

Your age also matters. If you have no children, you must be at least 25 years old but younger than 65 to claim the credit. If you have children, there are no age restrictions. The children you claim must be your own, a stepchild, foster child, or a relative you care for, and they must live with you for more than half the year.

How Much Money You Can Receive

The amount of the EITC varies based on your income and family structure. The credit is larger for people with children than for those without. For the 2023 tax year, the maximum credit for a single filer with no children is $560. A single filer with one child can receive up to $3,733, with two children up to $6,164, and with three or more children up to $6,935. These amounts are higher for married couples filing jointly.

The credit works in phases. As your income rises from zero, the credit amount increases until it reaches its maximum. Then, as your income continues to rise past a certain point, the credit begins to decrease. This means two people with different incomes might receive different amounts, even if they have the same number of children. The IRS publishes tables each year showing the exact credit amount for each income level.

How to Claim the EITC on Your Tax Return

You claim the EITC by filing a federal income tax return with the IRS. If you have no children, you use Form 1040 with Schedule EIC attached. If you have children, you also file Form 1040 but include Schedule EIC and Form 1040-SR if you are 65 or older. You will need your Social Security number, your filing status, your income information, and information about any children you are claiming.

When you file, the IRS calculates the credit amount based on the information you provide. If the credit is larger than the taxes you owe, the IRS sends you the difference as a refund. This is called a refundable credit. You can receive this refund by direct deposit to your bank account, by check, or by having it applied to next year's taxes.

You can file your return on your own using tax software, with help from a tax preparer, or with free help from a community organization. The IRS Free File program offers free tax software to people who earn below a certain income threshold. Many nonprofits and libraries also offer free tax preparation help during tax season.

When to File and What Documents You Need

Tax returns for the previous year are due on April 15 of the following year, though the IRS sometimes extends this important date. You can file as early as January. If you are owed a refund, filing earlier means you receive your money sooner. If you owe taxes, you have until the important date to pay.

Before you file, gather your documents. You will need your Social Security number and the Social Security numbers of any children you claim. You will need proof of your income — either a W-2 form from your employer or, if you are self-employed, records of your business income and expenses. If you are claiming children, you will need their dates of birth and proof that they lived with you for more than half the year. A birth certificate, school records, or lease agreement can serve as proof.

If you received unemployment benefits during the year, you will need the 1099-U form sent by your state. If you have investment income, you will need records of that as well. The more organized your documents are before you start, the faster the filing process goes.

Common Mistakes to Avoid

One frequent error is claiming children who do not meet the relationship or residency requirements. The IRS verifies this information, and if a child does not may have access to, the credit is reduced or removed and you may owe money back. Make sure the child is truly your own, a stepchild, foster child, or a relative you care for, and that they lived with you for more than half the year.

Another mistake is reporting income incorrectly. If you underreport your income to try to receive a larger credit, the IRS will catch the discrepancy when it matches your return against your W-2 or 1099 forms. This can result in penalties and interest on top of repaying the credit. Always report your actual income.

Some people also miss the important date to claim the credit. You can file a return for a previous year up to three years after the original important date, but waiting longer means you lose the money. If you did not file in previous years and think you may have been owed the EITC, you can still file those returns and claim the credit.

Where to Get Free Help Filing Your Return

If you cannot afford to pay a tax preparer, the IRS offers free resources. The IRS Free File program provides free tax software to people who earn below a certain income. You can access it through the IRS website at irs.gov. The software walks you through the filing process step by step and calculates your EITC automatically.

Many community organizations, libraries, and nonprofits also offer free tax preparation help during tax season, usually from January through April. You can find a free tax site near you by searching the IRS Volunteer Income Tax information (VITA) locator on the IRS website. VITA sites are staffed by trained volunteers who can answer questions about the EITC and help you file your return at no cost.

Frequently Asked Questions

Do I have to work a full year to claim the EITC?

No. You must have earned income during the year, but you do not need to have worked the entire year. If you worked part of the year, you can still claim the credit based on the income you earned during that time. The credit amount will be calculated based on your actual income for the year.

What happens if I claim the EITC and the IRS finds out I made a mistake?

The IRS will contact you and ask you to repay the portion of the credit you were not owed. If the mistake was unintentional, you typically repay the amount without penalty. If the IRS determines the error was intentional fraud, you may face penalties and interest. Always report your actual income and family situation to avoid this.

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

Yes. Self-employed people can claim the EITC if their net business income falls within the income limits. You will need to file Schedule C along with your Form 1040 to report your business income and expenses. The IRS uses your net profit (income minus expenses) to calculate the credit.

What if my income changes after I file my return?

If your income changes significantly after you file, you may need to file an amended return using Form 1040-X. This is especially important if you received a larger credit than you were owed based on your final income. Contact the IRS or a tax preparer if you think your return needs to be corrected.

Can I receive the EITC as a payment during the year instead of waiting until tax time?

The IRS offers an Advance EITC option that allows you to receive part of the credit in your paycheck throughout the year instead of waiting for your tax refund. You must request this from your employer using Form W-5. However, most people receive the full credit when they file their return, which is simpler for most households.