What the EITC Is, Who Is Eligible for It, & How It Can Benefit You

What is the Earned Income Tax Credit (EITC)?

The Earned Income Tax Credit (EITC) is a credit that gives hardworking families and individuals money back at tax time. It’s designed to encourage and reward work, offset federal payroll and income taxes, and raise living standards. If you qualify for the EITC, you can still receive a tax refund even if you don’t owe income tax. You can claim the credit whether you’re single or married, or have children or not. The main requirement is that you earned income during the tax year.


Who is Eligible for the EITC?

The three main criteria to claim the EITC are your income, a Social Security Number, and a qualifying child. (While claiming children is not a requirement, families with multiple children are eligible for higher credit amounts.)

INCOME: You need to work and earn income for at least part of the year. Your income cannot exceed the amounts in the chart below, including investment income. Earned income includes wages, salary, tips, employer-based disability, self-employment income, military pay, or union strike benefits.

SOCIAL SECURITY NUMBER: You need to have social security numbers that permit work for you, your spouse, and any children claimed for the EITC. You cannot claim the EITC if you file your taxes with an ITIN. For more information, please see Tax Filing with Immigrant or DACA Status.

QUALIFYING CHILD: If you claim children for the EITC, they must be a “qualifying child.” See below for details.


The Earned Income Tax Credit for the 2020 Tax Year

Number of children Single workers with income less than Married workers with income less than EITC up to
3+ children $50,954 $56,844 $6,660
2 children $47,440 $53,330 $5,920
1 child $41,756 $47,646 $3,584
No children $15,820 $21,710 $538

Additional Criteria

  • If you are not claiming children, you must be between the ages of 25 and 64.
  • Married couples must file taxes jointly.
  • Investment income must be $3,650 or less for the year.

Qualifying Children

  • Relationship: The child must be your son, daughter, grandchild, stepchild or adopted child; younger sibling, step-sibling, half-sibling, or their descendent; or a foster child placed with you by a government agency.
  • Age: The child must be under 19, under 24 if a full-time student, or of any age if totally and permanently disabled.
  • Residency: The child must live with you in the U.S. for more than half the year. Time living together doesn’t have to be consecutive.

More information on irs.gov » 


How Can the EITC Benefit You & Your Family?

Nearly 20% of Cuyahoga County residents live in poverty. The EITC is the largest, most effective relief program in the country. It’s designed to fill the gap between what you earn and what’s required to meet the basic needs of you and your family by increasing your income with a refundable tax credit. Qualifying for the EITC can help you to:

  • Build your savings and establish greater financial stability.
  • Receive relief from high housing costs.
  • Spend EITC funds locally to promote workforce participation, fuel the economy, and support your community.
  • Pursue additional education and training that boosts your earning power.
  • Save money so your children can attend college in the future.
  • Afford the medical care that you and your family need.

EITC income for children living in eligible families is linked to more work hours and higher earnings later in life

For each $3,000 per year in EITC that children in an eligible family receives before the age of 6, their working hours increase by 135 hours a year between the ages of 25 and 27, and their annual earnings increase by 17%.

Source: Greg J. Duncan, Kathleen M. Ziol-Guest, and Ariel Kalil, "Early-Childhood Poverty and Adult Attainment, Behavior, and Health," Child Development, January/February 2010, pp. 306-325


Individuals Who May Not Be Aware that They Qualify for the EITC

GRANDPARENT CAREGIVERS & FOSTER CARE PARENTS
Grandparents and other relatives care for millions of children in foster care and outside of the formal child welfare system. Relative caregivers and foster parents often do not know that they may be able to claim the children they take care of for the EITC or the Child Tax Credit (CTC).

ENLISTED MILITARY MEMBERS
Many enlisted members of the military earn less than $30,000 and are raising children. In addition, many National Guard members and Reservists have been activated for duty, which can result in a significant reduction in a family’s income. When enlisted members transition out of the military, they tend to experience longer periods of unemployment than civilians and tend to earn lower wages. Military families and returning veterans may qualify for tax benefits such as the EITC and CTC, but not realize they are eligible.

VICTIMS OF ABUSE
Not only do victims of domestic violence experience physical and psychological harm, domestic violence can lead to economic distress, financial dependence and employment instability. Free tax filing assistance and refundable tax credits, such as the EITC and CTC, may be a lifeline that can help survivors to boost earning power, establish a safety net, and ultimately end financial relationships with an abusive partner.

LOW-INCOME WORKERS WITHOUT CHILDREN
Tax credits can represent a useful income boost for hardworking individuals who do not have children living with them. While workers not living with children receive only a small EITC (averaging less than $300), some non-custodial parents may be eligible for a substantial CTC if they are permitted by a divorce or separation agreement to claim a child as a dependent.

INDIVIDUALS & FAMILIES UNDER EXCESSIVE DEBT
An increasing number of workers are overwhelmed with debt, seeing their savings plummet, or are falling behind with their monthly bills. More families are turning to debt management assistance organizations, consumer credit counseling services, and home foreclosure prevention programs for help. The EITC helps alleviate the financial burden of excessive debt for hardworking families and individuals.

LOW-INCOME WORKERS WITH DISABILITIES & CHILDREN WITH DISABILITIES
Individuals with disabilities and families that are raising children with disabilities face profound challenges. Workers who receive long-term, employer-paid disability benefits and are under the minimum retirement age can qualify for the EITC and CTC, even if they didn’t work during the year. These benefits are considered earned income. Families need to know that a child of any age with a permanent and total disability can be claimed for the EITC. Workers who have a severe disability or are raising a child with a severe disability can claim the tax credits and continue to receive other public benefits.

WORKERS RECENTLY UNEMPLOYED
Workers who are recently unemployed, experiencing reduced income, or engaged with workforce training and development programs may be eligible for the EITC.

LIMITED ENGLISH SPEAKING WORKERS
Language assistance is available at select tax site locations in Spanish, Mandarin Chinese (and other Asian languages), and American Sign Language for deaf or hard of hearing individuals.

Schedule an appointment with the Cuyahoga EITC Coalition to see if you qualify for the EITC and other asset-building programs.