EITC (Earned Income Tax Credit)
A refundable federal tax credit for low-to-moderate income working individuals and families.
The Earned Income Tax Credit (EITC) is one of the largest federal tax credits available. It is fully refundable, meaning you can receive it even if you owe no tax. The credit amount depends on your earned income, filing status, and number of qualifying children (0 to 3+). For 2026, the maximum credit ranges from $664 (no children) to $8,231 (3+ children). The credit phases in as income rises, reaches a maximum, then phases out at higher income levels.
How it works
The EITC is calculated using three inputs: your earned income, your filing status, and the number of qualifying children you claim, from zero up to three or more. The credit phases in as your earned income rises from zero, plateaus at a maximum amount over a middle range of income, then phases out and disappears entirely once your income crosses the upper limit for your family size. Because it is fully refundable, the IRS pays you the credit even if you had no tax liability to offset, which makes it one of the largest anti-poverty tools in the federal tax code.
You claim the EITC on your Form 1040 using the EIC worksheet in the instructions, or by letting tax software calculate it from your W-2 and Schedule C income plus the qualifying-child information on Schedule EIC. Investment income — interest, dividends, and capital gains — is capped; exceeding that limit disqualifies you from the credit no matter how low your earned income is. The IRS holds EITC refunds until mid-February each year under the PATH Act, specifically to give it time to verify claims against employer wage data before releasing funds.
People without qualifying children can still claim a much smaller EITC if they meet age and residency rules, a detail that is often missed. The credit is one of the most commonly audited items on a tax return because of past error rates, so keeping documentation of your relationship to any qualifying child and their residency with you matters. Self-employed taxpayers must also net their Schedule C income correctly, since gross receipts alone are not what counts as earned income for the credit.
Example: EITC for a family with two children
A single parent with two qualifying children earns $28,000 in wages for the year. Because that income falls within the plateau range for a two-child family, the parent qualifies for a credit close to the maximum amount the IRS sets for that family size, well into four figures.
If the same parent's income rises to $45,000 the following year, the credit shrinks because the earnings now sit in the phase-out range, and it would disappear completely once income crosses the upper limit for a two-child household. The exact dollar amounts of the plateau and phase-out points change with family size and are published fresh by the IRS each year.
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Related Terms
Earned Income Credit (EITC)
A refundable tax credit for low- to moderate-income workers. The amount depends on income, filing status, and number of qualifying children — worth up to $8,046 in 2025 with three or more children.
Child Tax Credit
A tax credit worth up to $2,200 per qualifying child under age 17 for 2025 and 2026 (raised from $2,000 by OBBBA). Up to $1,700 is refundable as the Additional Child Tax Credit, meaning you can receive it even if you owe no tax.
Adjusted Gross Income (AGI)
Your gross income minus specific adjustments such as student loan interest, IRA contributions, and self-employment tax. AGI is the starting point for calculating your taxable income.
Filing Status
Your tax classification based on marital and family situation — Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Surviving Spouse.