Tag Archives: (EITC)

What is the earned income tax credit (EITC)? #low #income

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Key Elements of the U.S. Tax System

What is the earned income tax credit?

The earned income tax credit subsidizes low-income working families. The credit equals a fixed percentage of earnings from the first dollar of earnings until the credit reaches its maximum. The maximum credit is paid until earnings reach a specified level, after which it declines with each additional dollar of income until no credit is available.

How the EITC Works

The earned income tax credit (EITC) provides substantial support to low- and moderate-income working parents, but very little support to workers without qualifying children (often called childless workers). Workers receive a credit equal to a percentage of their earnings up to a maximum credit. Both the credit rate and maximum credit vary by family size, with larger credits available to families with more children. After the credit reaches its maximum, it remains flat until earnings reach the phaseout point. Thereafter, it declines with each additional dollar of income until no credit is available (figure 1).

By design, the credit only benefits working families. Families with children receive a much larger credit than workers without qualifying children.[1] In 2015, the maximum credit for families with one child is $3,359, while the maximum credit for families with three or more children is $6,242.

In contrast to the substantial credit for workers with children, childless workers can receive a maximum credit of only $503. Moreover, the credit for childless workers phases out at much lower incomes. Also, childless workers must be at least 25 and not older than 64 to qualify for a subsidy—restrictions that do not apply to workers with children. As a result of these tighter rules, 97 percent of benefits from the credit go to families with children.

Impact of the EITC

Research shows that the EITC encourages single people and primary earners in married couples to work (Dickert, Houser, and Sholz 1995; Eissa and Liebman 1996; Meyer and Rosenbaum 2000, 2001). The credit, however, appears to have little effect on the number of hours they work once employed. Although the EITC phaseout could cause people to reduce their hours (because credits are lost for each additional dollar of eanings, which is effectively a surtax on earnings in the phaseout range), there is little empirical evidence of this happening (Meyer 2002).

The one group of people that may reduce hours of work in response to the EITC incentives are the lower-earning spouses in a married couple (Eissa and Hoynes 2006). On balance, though, the increase in work resulting from the EITC dwarfs the decline in participation among second earners in married couples.

The EITC is the single most effective antipoverty program targeted at working-age households. According to a supplemental poverty measure calculated by the Census Bureau—which unlike the official poverty measure takes into account the effect of federal income taxes—the EITC lifted 6.2 million people out of poverty in 2013, including 3.2 million chldren (DaSilva 2014; Short 2013).

Benefits from the EITC are concentrated among the lowest earners, with almost all benefits going to families in the bottom three quintiles of the distribution (figure 2). (Each quinitle contains 20 percent of the population, ranked by household income.)

Recent changes

As a result of legislation enacted in 2001. the EITC phases out at higher income levels for married couples than for single individuals. That threshold was increased as part of the American Recovery and Reinvestment Act of 2009 (ARRA). The same act increased the maximum EITC for workers with at least three children. The American Taxpayer Relief Act of 2012 made the 2001 EITC changes permanent ($3,000 higher threshold for married couple phaseout, indexed) but extended the ARRA changes ($5,000 higher threshold for married couple phaseout, indexed, and higher credit maximum for workers with at least three children). The Bipartisan Budget Act of 2015 made all of these changes permanent.

Proposals for reform

President Obama and members of the Republican congressional leadership have proposed EITC amendments to provide a substantial credit for childless workers. These proposals typically involve expanding the eligible age limits for the childless EITC—lowering the age of eligibility from 25 to 21 and increasing the age of eligibility from 64 to 67—increasing the maximum credit, and expanding the income range over which the credit is available. A more far-reaching approach to reform that would still expand benefits to childless workers would be to separate the credit into two pieces—one focused on work and one focused on children. Examples of this type of reform have been proposed by many, including the Bush Tax Reform Panel of 2005. the Bipartisan Policy Center. and Maag (2015 b).

Error Rates and the EITC

The EITC likely delivers more than a quarter (28.5 percent) of all payments in error, according to a recent IRS compliance study. The largest source of error was determining whether a child claimed for the EITC actually qualified (Internal Revenue Service 2014). The child must live with the parent (or other relative) claiming the EITC for more than half of the year in order to qualify. The IRS receives no administrative data that can verify where a child resided for the majority of the year, making it difficult for the agency to monitor compliance. Attempts to use administrative data from other programs to verify child residence have not proven successful (Pergamit et al. 2014).

[1] A qualifying child must meet requirements based on relationship, age, residency, and tax filing status. See: Qualifying Child Rules .


2015 Earned Income Tax credit (EITC) Chart #income #tax #department #india

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By John D on November 23, 2014

A range of economic research since the 1990s has found that the EITC for families with children has increased work, especially among single mothers. Together with the EITC expansion, these proposals will help reorient the tax code to reward work for low-wage workers while making sure that highly compensated professionals pay taxes on their incomes like everyone else. The 2015 EITC for a childless adult with wages at the projected poverty line ($12,566) would rise from $171 to $841.

2015 Earned Income Credit (2015 EIC) Increase

This boost would more than cover a month’s worth of fair market rent for a one bedroom rental in most counties in the state. And for a childless adult working full time at the minimum wage, the credit would be a bit more modest and jump from $22 to $542. As one can see with the 2015 EITC Chart, the EITC is an effective program and will continue to be one in 2015 with the new EITC limits. Taxpayers must use the earned income credit 2015 will be something that many taxpayers are considered about for years to come.

2015 Earned Income Tax credit (2015 EITC) Chart

The table above will give an estimate for what families should expect for the 2015 EITC (Earned Income Tax Credit). Taxpayers can use this table to help fill out their 2015 tax return when they can in 2016. If taxpayers are using a tax preparer, this is a good way to check that you are getting the right amount of the earned income credit that is deserved.

Signed into law in 1975, the EITC was designed to offset regressive payroll taxes, reward hard work, and supplement low wages. Since the credit’s inception, presidents from both parties have strengthened it several times, and it is now one of the federal government’s largest and most effective anti-poverty programs. Millions and millions of Americans claim the credit each year.

In tax year 2014 the maximum income for single head of households is $46,997, ($52,427 married filing jointly) for families with three or more qualifying children, and less for people with fewer or no children. The maximum credit is $6,143 with three or more qualifying children and less for those with fewer children.

State EITC Programs for 2015

Beginning in the mid-1980s, a number of states created local versions of the federal EITC to help offset state and local taxes for low-wage workers. Twenty-five states and the District of Columbia have created a state version of the EITC to supplement the federal credit and reduce the state and local tax burden on low- and moderate-income working families. In addition, local governments in Montgomery County, Md. San Francisco and New York City offer their own version of the EITC.

Almost all state EITCs are “refundable,” meaning that if the size of the family’s credit exceeds the amount of state income tax it owes, the family receives the difference in the form of a refund check. You can use the 2015 EITC Chart to verify how much you can potentially receive from this tax credit. The amount will change every year and it is essential to check the updated IRS EITC Chart to learn about the earned income credit for 2015.

The 2016 Earned Income Tax Credit is very similar. It will be important clarify how much credit you are entitled too in each year. There are often changes between tax years affecting the amount and who can claim the credit. Do not always depend on the amount of the credit being the same. It could go up or it could go down.

More Information about 2015 and 2016 Earned Income Tax credit (EITC)

Top State EITC Programs


Do You Qualify for the Earned Income Tax Credit, EITC? #income #statement #sample

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What Is the Earned Income Tax Credit (or EITC)?

The Earned Income Tax Credit (EIC or EITC) is a refundable credit for workers who earn low or moderate incomes. This credit is meant to supplement the income you have earned through working, whether for yourself (self-employed ) or for someone else. If you qualify for the Earned Income Tax Credit you can reduce your taxes and increase your tax refund. In general, the EITC allows more working people and their families to keep more of their hard-earned money.

The income limits for the Earned Income Credit have been adjusted for 2015, so even if you didn t qualify for the EITC in the past, you may be able to claim it this year. The maximum amount of the credit has also increased.

Am I Missing Out on the Earned Income Tax Credit?

It is estimated that 1 out of 5 people who qualify for the EITC don t claim it on their tax returns. Those people most in danger of missing out on their Earned Income Tax Credit include:

  • the self-employed
  • people living in rural areas
  • grandparents raising their grandchildren
  • the recently divorced
  • the recently unemployed
  • taxpayers with no children
  • recipients of disability benefits

Don t let this happen to you! When you prepare your tax return on efile.com. we will automatically check to see if you qualify for the EITC, calculate the amount of your credit, and fill out the right forms for you to claim it.

Remember: even if you don t owe income tax, you could still get the EITC as a refund check, but you have to file a return to claim it.

Do I Qualify for the Earned Income Tax Credit?

Use the free Earned Income Credit Educator below to see if you qualify for the EITC:

Check out the sections below for more information about the Earned Income Tax Credit:

What Are the Qualifications for the Earned Income Tax Credit?

For Tax Year 2015, the EITC begins to phase out (decrease in value) at an AGI of $8,240 for individuals with no Qualifying Children. and $18,110 for individual taxpayers with one or more Qualifying Children.

The EITC phases out entirely (is not available) for taxpayers with an adjusted gross income of:

  • $14,820 with no Qualifying Children ($20,330 if married filing jointly )
  • $39,131 with one Qualifying Child ($44,651 if married filing jointly)
  • $44,454 with two Qualifying Children ($49,974 if married filing jointly)
  • $47,747 with three or more Qualifying Children ($53,267 if married filing jointly)

You also must meet a number of other requirements :

  • You, your spouse if married filing jointly, and any Qualifying Children you claim must each have a valid Social Security Number.
  • You must have earned income (from employment or self-employment ).
  • Your filing status cannot be married filing separately.
  • You must be a U.S. citizen or resident alien for the whole year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return.
  • You cannot be the Qualifying Child (for the Earned Income Credit) of another person.
  • Your Qualifying Child for the EITC cannot be used by more than one person to claim the EITC.
  • If you do not have a Qualifying Child, you must:
    • be older than 25 but younger than 65 at the end of the year
    • live in the United States for more than half the year
    • not be the Qualifying Child of another person.
  • You cannot file Form 2555 or 2555-EZ (Foreign Earned Income).
  • Your investment income for the year must be $3,400 or less for Tax Year 2015.

Special Note for Single Workers with No Children: Single filers with no dependents are believed by the IRS to be the largest group of Qualifying taxpayers who do not claim the EITC on their tax returns. Do not fall into this trap! Even if you are not married and/or have no children, you may still be able to claim the credit. You qualify for the EITC as long as you were between the ages of 25 and 65 on Dec. 31 of the tax year, you earned income through work, and you met the income limits specified above.

What Is Earned Income?

Earned income is any money you were paid for doing work, whether you work for yourself or for someone else.

The following are examples of earned income:

  • Salaries
  • Wages
  • Tips
  • Commissions
  • Royalties
  • Self-employment net earnings
  • Statutory employee gross pay
  • Jury duty pay
  • Union strike benefits
  • Long-term disability benefits received before minimum retirement age
  • Nontaxable combat pay, if you choose to include it (see special EITC rules )

Earned income does NOT include :

How Much Earned Income Tax Credit Do I Get?

The amount of Earned Income Credit you get depends on several factors. In general, your credit is more valuable if you have one or more Qualifying Children .

For 2015, the maximum Earned Income Tax Credit per taxpayer is:

  • $503 with no Qualifying Children
  • $3,359 with one Qualifying Child
  • $5,548 with two Qualifying Children
  • $6,242 with three or more Qualifying Children

The EITC can be confusing. If you need more help determining if you are eligible for the Earned Income Tax Credit and figuring the exact amount of your credit, you should just begin preparing a tax return using efile.com and we will calculate your EITC credit amount for you.

Are There Special Rules for the Earned Income Tax Credit (EITC)?

Special EITC Rules for Members of the Military

Members of the armed forces do not normally include nontaxable pay, such as combat pay, in their earned income when calculating the Earned Income Credit. However, they may choose to include nontaxable pay in their earned income for the purposes of calculating the EITC. This may have the effect of increasing their credit amount.

Special EITC Rules for Members of the Clergy

The housing allowance provided for a member of the clergy as a part of their pay is not normally included in taxable income. but it is reported as a part of their net earnings from self-employment. Therefore, the housing allowance (or rental value of the home) may be included in earned income for the purposes of calculating the Earned Income Tax Credit.

Special EITC Rules for Those Receiving Disability Benefits

Disability retirement benefit payments are included in earned income if you are younger than your minimum retirement age (the earliest age you could have received a pension had you not been disabled). After your minimum retirement age, any disability benefit payments will be considered taxable pension payments and may not be counted as earned income. Social Security Disability Insurance and private disability insurance payments for which you paid the premiums are not considered earned income for the purposes of calculating the EITC.

Special EITC Rules for Adopted Children

If your adopted child has not yet been issued a Social Security Number, he/she may be assigned an Adoption Taxpayer Identification Number for tax purposes. Unfortunately, this number may not be used to claim a Qualifying Child for the Earned Income Credit. To claim the EITC, you may file an amended tax return once your child has been assigned their SSN.

If you have adopted a child, find out about the Adoption Tax Credit .

Are There State and Local Earned Income Tax Credits?

Yes! Twenty-one states, the District of Columbia, New York City, and Montgomery County, MD, have their own Earned Income Tax Credits. If you are filing a tax return for one of these states, we will help determine if you qualify for a state or local EITC, as well as the Federal EITC, when you prepare your tax return on efile.com.

List of States with Local Earned Income Tax Credits

How Do I Claim the Earned Income Tax Credit on My Tax Return?

When you prepare your tax return on efile.com, we will automatically check to see if you qualify for the Earned Income Tax Credit. If you qualify for the EITC, efile.com will calculate the exact amount of your credit for you. It will also generate the form(s) you need to claim your full credit and fill them out for you.

Where Can I Find More Information on the Earned Income Tax Credit?

See what other tax credits and tax deductions you may qualify to claim on your tax return.

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Do I Qualify for EITC? #efile #free

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EITC Help

Do I Qualify for EITC?

You qualify for EITC if:

  • you have earned income and adjusted gross income within certain limits; AND
  • you meet certain basic rules; AND
  • you either:
    • meet the rules for those without a qualifying child ; OR
    • have a child that meets all the qualifying child rules for you, or your spouse if you file a joint return.

Use the EITC Assistant to find out your filing status, if your child is a qualifying child, if you are eligible, and estimate the amount of the credit you may get.

Basic Rules

Social Security Number

You, your spouse and any qualifying child you list on your tax return must each have a Social Security number that is valid for employment.

Filing Status

  • Married filing jointly
  • Head of household
  • Qualifying widow(er)
  • Single

You can’t claim EITC if your filing status is married filing separately .

If you, or your spouse, are a nonresident alien. see Publication 519, U.S. Tax Guide for Aliens . to find out if you are eligible for EITC.

Income Earned During 2015

  • Your tax year investment income must be $3,400 or less for the year.
  • Must not file Form 2555, Foreign Earned Income or Form 2555-EZ, Foreign Earned Income Exclusion .
  • Your total earned income must be at least $1.
  • Both your earned income and adjusted gross income (AGI) must be no more than:

Qualifying Children Claimed

I Have a Qualifying Child

If you, and your spouse if filing a joint return, meet the criteria above and you have a child who lives with you, you may be eligible for EITC. Each child you claim must pass the relationship, age, residency and joint return tests to be your qualifying child. See the Qualifying Child Rules for guidance.

I Don’t Have a Qualifying Child

If you and your spouse, if filing a joint return, meet the basic EITC rules for everyone, you qualify for EITC if:

  • You resided in the United States for more than half of the year; AND
  • You cannot be claimed as a dependent or qualifying child on anyone else’s return; AND
  • You must have been at least 25 but under 65 years old at the end of the tax year.

Exceptions

Special EITC Rules

Special EITC rules for members of the military, ministers, members of the clergy, those receiving disability benefits and those impacted by disasters.

Disability and EITC

Many persons with disabilities or persons having children with disabilities qualify for EITC.

Page Last Reviewed or Updated: 16-Jun-2016


2016 Earned Income Credit Amount and EITC Table #income #tax #refund

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Browse: Home / 2016 Earned Income Credit Amount

By John D on October 23, 2015

The IRS announced the 2016 Earned Income Credit amounts which have some small changes from the 2015 EIC. In a statement, they noted that for tax year 2016 the maximum Earned Income Credit (2016 EITC) amount is $6,269 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,242 for 2015 EITC. According to the rules, much has stayed the same in calculating the earned income amount This is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. You can see this amount on the 2016 EIC table.

The earned income tax credit is a powerful tool fighting poverty and changes each year. You can receive this money when filing a yearly tax return. Each person will receive a different amount and taxpayers must look at the current 2016 EITC table to estimate the amount of credit that will be on their tax return. Some taxpayers may not owe any tax because of the credit and receive a very large tax refund due to the EITC. Remember, that there are small changes from the 2015 earned income credit so taxpayers should always double check before relying on any funds. This could have an effect on the size of the tax refund received by some taxpayers.

The IRS revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs. It is updated yearly and below is the most current amounts. Below is a current earned income credit tax table for tax year 2016. Taxpayers can use this EIC table to complete their own taxes or use it to double check that their tax preparer is correcly preparing their 2015 tax return and claiming all credits when they get it done during the 2016 filing season.

2016 Earned Income Credit Table

The 2016 Earned Income Credit still is a tax credit that many Americans will continue to rely upon. Taxpayers can use this 2016 EITC to estimate how much they will receive from the earned income tax credit during the 2016 tax year. When using the EITC table, it absolutely essential to be certain of your tax filing status. This will have a big impact on the amount of the credit that you will receive. Be careful to note that the numbers are slightly different than the 2015 earned income credit. Very important to make sure you are claiming the 2016 earned income tax credit for your 2016 federal income taxes.

Restrictions on 2016 Earned Income Tax Credit

For taxable years beginning in 2016, the earned income tax credit is not allowed if the aggregate amount of certain investment income exceeds $3,400. This would be if someone owns many investments that are generating income. The IRS does not want people to use the EITC when they have other means of supporting themselves.

There are also other limits related to the advancing the earned income tax credit. If you are unfamiliar if you will qualify for the 2016 earned income tax credit, it may be best to consult with a skilled tax preparer or use software that will allow you to determine the amount you can receive.

Other 2016 Earned Income Credit Information

Remember, certain taxpayers may also be eligible for state earned income tax credit programs. It is important to check with you local state tax authority to learn about other programs that low-income taxpayers could qualify for. There are many out there that can provide a boost to income right away at tax time.

It is also important to be honest when claiming the tax credit. The IRS is vigorously enforcing EITC fraud and will investigate suspicious claims. This could lead to large penalties and fines if a taxpayer is caught claiming the EITC when they should not have been claiming it. However, many EITC errors occur primarily because of the complex rules related to claiming the credit and are unintentional. If this is really the case, the IRS could be lenient in fines or penalties levied against the taxpayer who submitted the incorrect EIC claim. They understand that the instructions are long and earned income tax credits can be confusing to professionals as well as ordinary taxpayers. Taxpayers should not hesitate to file for the EITC because they feel they are at an increased risk for an audit if they really should qualify for the funds.

More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)


California Earned Income Tax Credit (Cal EITC) #income #protection #cover

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California Earned Income Tax Credit (Cal EITC)

California began offering its own Earned Income Tax Credit (Cal EITC) starting with calendar year 2015 tax returns. This is a new refundable tax credit that puts money back in the pockets of California s working families and individuals.

If you owe taxes, the Cal EITC reduces the amount of taxes you might owe and may allow you a refund when you file your taxes. If you do not owe taxes, the Cal EITC tax credit will provide you with a tax refund when you file your taxes.

If you have yet to file your 2015 state return and think you may qualify for Cal EITC, there is still time to file. While the deadline to file was April 18, 2016, all taxpayers receive an automatic extension to file until October 17, 2016. Free help is also available at free tax return prep sites around the state. Find a location near you at CalEITC4Me.org .

If you already filed your 2015 state return and think you may qualify for Cal EITC, you may amend your return. Consider contacting your professional tax preparer, or follow these instructions to fill out a Form 540X and Form 3514 to claim the credit.

Find your filing status below to see how much you may qualify for, view the 2015 Earned Income Tax Credit Table. or use the CalEITC4Me online calculator to estimate your credit:

This credit is available to California households with adjusted gross incomes of less than $6,580 if there are no qualifying children, less than $9,880 if there is one qualifying child, or less than $13,870 if there are two or more qualifying children.

You qualify for Cal EITC if:

  • You have wages and adjusted gross income within certain limits, AND
  • You, your spouse, and any qualifying children each have a social security number issued by the Social Security Administration that is valid for employment, AND
  • You do not use the married/RDP filing separately filing status, AND
  • You lived in California for more than half the tax year.

Eligible sources of earned income from:

  • W-2 wages.
  • Salaries, tips.
  • Other employee compensation subject to California withholding.

Note: For Cal EITC, earned income does not include income from self-employment.

Maximum Income Limit

Both your adjusted gross income and earned income (defined above) must be no more than:

  • $6,580 if there are no qualifying children.
  • $9,880 if there is one qualifying child.
  • $13,870 if there are two or more qualifying children.

Your investment income, such as interest, dividends, royalties, and capital gains cannot exceed $3,400 for the entire tax year.
You may file as:

  • Single.
  • Married/Registered Domestic Partner (RDP) filing jointly.
  • Head of Household (HOH).

Note: Married/RDP Filing Separately status may not be used.
Your qualifying child must meet 3 criteria:

  • Relationship – Is the taxpayer s child, stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of any of them.
  • Residence – Had the same principal residence as the taxpayer in California for more than half the tax year. Certain exceptions apply.
  • Age – Child must be younger than the taxpayer and either a) under the age of 19 at the end of the tax year, or b) under the age of 24 if a full-time student for at least 5 months of the year. A permanently and totally disabled child may be included at any age.

The child only qualifies for one return. If the child can be claimed by more than one taxpayer, the child s qualification goes to:

  • The parent.
  • If more than 1 taxpayer is the child s parent, the parent with whom the child lived for the longest time during the year, or if the time was equal, the parent with the highest adjusted gross income (AGI).
  • If no eligible parent claims the child, the individual claiming the child, if the individual’s AGI exceeds the AGI of any parent eligible to claim the child.

If no taxpayer is the child s parent, the taxpayer with the highest AGI.

Your principal residence must be in California for more than half the tax year.

If you do not have a qualifying child, you (or your spouse if you file a joint return) must be between 25 and 65 years old at the end of the tax year.

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2015 Earned Income Tax credit (EITC) Chart #income #filing

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#irs earned income credit table

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By John D on November 23, 2014

A range of economic research since the 1990s has found that the EITC for families with children has increased work, especially among single mothers. Together with the EITC expansion, these proposals will help reorient the tax code to reward work for low-wage workers while making sure that highly compensated professionals pay taxes on their incomes like everyone else. The 2015 EITC for a childless adult with wages at the projected poverty line ($12,566) would rise from $171 to $841.

2015 Earned Income Credit (2015 EIC) Increase

This boost would more than cover a month’s worth of fair market rent for a one bedroom rental in most counties in the state. And for a childless adult working full time at the minimum wage, the credit would be a bit more modest and jump from $22 to $542. As one can see with the 2015 EITC Chart, the EITC is an effective program and will continue to be one in 2015 with the new EITC limits. Taxpayers must use the earned income credit 2015 will be something that many taxpayers are considered about for years to come.

2015 Earned Income Tax credit (2015 EITC) Chart

The table above will give an estimate for what families should expect for the 2015 EITC (Earned Income Tax Credit). Taxpayers can use this table to help fill out their 2015 tax return when they can in 2016. If taxpayers are using a tax preparer, this is a good way to check that you are getting the right amount of the earned income credit that is deserved.

Signed into law in 1975, the EITC was designed to offset regressive payroll taxes, reward hard work, and supplement low wages. Since the credit’s inception, presidents from both parties have strengthened it several times, and it is now one of the federal government’s largest and most effective anti-poverty programs. Millions and millions of Americans claim the credit each year.

In tax year 2014 the maximum income for single head of households is $46,997, ($52,427 married filing jointly) for families with three or more qualifying children, and less for people with fewer or no children. The maximum credit is $6,143 with three or more qualifying children and less for those with fewer children.

State EITC Programs for 2015

Beginning in the mid-1980s, a number of states created local versions of the federal EITC to help offset state and local taxes for low-wage workers. Twenty-five states and the District of Columbia have created a state version of the EITC to supplement the federal credit and reduce the state and local tax burden on low- and moderate-income working families. In addition, local governments in Montgomery County, Md. San Francisco and New York City offer their own version of the EITC.

Almost all state EITCs are “refundable,” meaning that if the size of the family’s credit exceeds the amount of state income tax it owes, the family receives the difference in the form of a refund check. You can use the 2015 EITC Chart to verify how much you can potentially receive from this tax credit. The amount will change every year and it is essential to check the updated IRS EITC Chart to learn about the earned income credit for 2015.

The 2016 Earned Income Tax Credit is very similar. It will be important clarify how much credit you are entitled too in each year. There are often changes between tax years affecting the amount and who can claim the credit. Do not always depend on the amount of the credit being the same. It could go up or it could go down.

More Information about 2015 and 2016 Earned Income Tax credit (EITC)

Top State EITC Programs


What is the earned income tax credit (EITC)? #income #tax #relief

by ,

#earned income credit

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Key Elements of the U.S. Tax System

What is the earned income tax credit?

The earned income tax credit subsidizes low-income working families. The credit equals a fixed percentage of earnings from the first dollar of earnings until the credit reaches its maximum. The maximum credit is paid until earnings reach a specified level, after which it declines with each additional dollar of income until no credit is available.

How the EITC Works

The earned income tax credit (EITC) provides substantial support to low- and moderate-income working parents, but very little support to workers without qualifying children (often called childless workers). Workers receive a credit equal to a percentage of their earnings up to a maximum credit. Both the credit rate and maximum credit vary by family size, with larger credits available to families with more children. After the credit reaches its maximum, it remains flat until earnings reach the phaseout point. Thereafter, it declines with each additional dollar of income until no credit is available (figure 1).

By design, the credit only benefits working families. Families with children receive a much larger credit than workers without qualifying children.[1] In 2015, the maximum credit for families with one child is $3,359, while the maximum credit for families with three or more children is $6,242.

In contrast to the substantial credit for workers with children, childless workers can receive a maximum credit of only $503. Moreover, the credit for childless workers phases out at much lower incomes. Also, childless workers must be at least 25 and not older than 64 to qualify for a subsidy—restrictions that do not apply to workers with children. As a result of these tighter rules, 97 percent of benefits from the credit go to families with children.

Impact of the EITC

Research shows that the EITC encourages single people and primary earners in married couples to work (Dickert, Houser, and Sholz 1995; Eissa and Liebman 1996; Meyer and Rosenbaum 2000, 2001). The credit, however, appears to have little effect on the number of hours they work once employed. Although the EITC phaseout could cause people to reduce their hours (because credits are lost for each additional dollar of eanings, which is effectively a surtax on earnings in the phaseout range), there is little empirical evidence of this happening (Meyer 2002).

The one group of people that may reduce hours of work in response to the EITC incentives are the lower-earning spouses in a married couple (Eissa and Hoynes 2006). On balance, though, the increase in work resulting from the EITC dwarfs the decline in participation among second earners in married couples.

The EITC is the single most effective antipoverty program targeted at working-age households. According to a supplemental poverty measure calculated by the Census Bureau—which unlike the official poverty measure takes into account the effect of federal income taxes—the EITC lifted 6.2 million people out of poverty in 2013, including 3.2 million chldren (DaSilva 2014; Short 2013).

Benefits from the EITC are concentrated among the lowest earners, with almost all benefits going to families in the bottom three quintiles of the distribution (figure 2). (Each quinitle contains 20 percent of the population, ranked by household income.)

Recent changes

As a result of legislation enacted in 2001. the EITC phases out at higher income levels for married couples than for single individuals. That threshold was increased as part of the American Recovery and Reinvestment Act of 2009 (ARRA). The same act increased the maximum EITC for workers with at least three children. The American Taxpayer Relief Act of 2012 made the 2001 EITC changes permanent ($3,000 higher threshold for married couple phaseout, indexed) but extended the ARRA changes ($5,000 higher threshold for married couple phaseout, indexed, and higher credit maximum for workers with at least three children). The Bipartisan Budget Act of 2015 made all of these changes permanent.

Proposals for reform

President Obama and members of the Republican congressional leadership have proposed EITC amendments to provide a substantial credit for childless workers. These proposals typically involve expanding the eligible age limits for the childless EITC—lowering the age of eligibility from 25 to 21 and increasing the age of eligibility from 64 to 67—increasing the maximum credit, and expanding the income range over which the credit is available. A more far-reaching approach to reform that would still expand benefits to childless workers would be to separate the credit into two pieces—one focused on work and one focused on children. Examples of this type of reform have been proposed by many, including the Bush Tax Reform Panel of 2005. the Bipartisan Policy Center. and Maag (2015 b).

Error Rates and the EITC

The EITC likely delivers more than a quarter (28.5 percent) of all payments in error, according to a recent IRS compliance study. The largest source of error was determining whether a child claimed for the EITC actually qualified (Internal Revenue Service 2014). The child must live with the parent (or other relative) claiming the EITC for more than half of the year in order to qualify. The IRS receives no administrative data that can verify where a child resided for the majority of the year, making it difficult for the agency to monitor compliance. Attempts to use administrative data from other programs to verify child residence have not proven successful (Pergamit et al. 2014).

[1] A qualifying child must meet requirements based on relationship, age, residency, and tax filing status. See: Qualifying Child Rules .


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Earned Income Tax Credit (EITC)

The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. 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. EITC reduces the amount of tax you owe and may give you a refund.

Do I Qualify for EITC?

To qualify for EITC you must have earned income from working for someone or from running or owning a business or farm and meet basic rules. And, you must either meet additional rules for workers without a qualifying child or have a child that meets all the qualifying child rules for you.

EITC Assistant

Use the EITC Assistant to see if you qualify for tax years: 2015, 2014 and 2013. The EITC Assistant helps you find out your filing status, if your child is a qualifying child, if you are eligible and estimate the amount of the EITC you may get.

Income Limits and Table

How Do I Claim EITC?

You need to file a tax return to claim EITC. Find out:

  • the documents you need
  • the common errors to watch for
  • the consequences of filing an EITC return with an error
  • how to get help preparing your return
  • what you need to do if your EITC was denied in a previous year
  • how to claim the credit for earlier tax years

Received a Notice?

I Received a Letter from IRS about EITC, What Should I Do?

We send letters about EITC that may:

  • suggest you claim EITC if you do qualify
  • ask you to send information to verify your EITC claim
  • provide important information about your claim

This letter/notice page lets you know what you need to do if you receive a letter or notice from us about EITC.


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2015 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates

Investment income must be $3,400 or less for the year.

Maximum Credit Amounts

The maximum amount of credit for Tax Year 2015 is:

  • $6,242 with three or more qualifying children
  • $5,548 with two qualifying children
  • $3,359 with one qualifying child
  • $503 with no qualifying children

For more information on whether a child qualifies you for EITC, see:

The American Tax Relief Act of 2012

The American Tax Relief act extended the relief for married taxpayers, the expanded credit for taxpayers with three or more qualifying children and other provisions to December 31, 2017.

IRS Recognizes Legal Same-Sex Marriages

In June 2015, the United States Supreme Court held that all states must allow same-sex couples to marry on the same terms and conditions as opposite-sex couples, and that all states must recognize lawful same-sex marriages performed in other states.

The U.S. Department of the Treasury and the Internal Revenue Service ruled in 2013 that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes The ruling applies to all federal tax provisions where marriage is a factor, including filing status. claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law. Read more here .

Page Last Reviewed or Updated: 24-Nov-2015

EITC Income Tables