Earned Income Tax Credit (EITC)
A refundable federal tax credit for low-to-moderate income workers that reduces tax liability.
What is EITC?
The Earned Income Tax Credit (EITC) is a refundable federal tax credit available to working individuals and families with low-to-moderate earned income. Unlike a deduction, a refundable credit directly reduces tax owed — and if the credit exceeds the tax liability, the excess is paid as a cash refund. The credit amount rises with earned income up to a threshold, then phases out at higher income levels, creating a strong work incentive. For 2024, the maximum EITC ranges from $632 (no qualifying children) to $7,830 (three or more qualifying children). The EITC is one of the largest federal anti-poverty programs, lifting millions of families above the poverty line annually. Eligibility requires filing a tax return, even if income is otherwise below the filing requirement.
Example
A single parent earning $25,000 with two qualifying children receives the maximum EITC of approximately $6,960 for 2024. If their regular tax liability is $1,500, the EITC first eliminates the $1,500 tax bill and then pays the remaining $5,460 as a cash refund. This effectively provides a 28% supplement to their earned income — the largest single tax benefit available to working low-income families.