The Earned Income Tax Credit reduces what you owe in taxes, or increases your refund, based on how much you earned and how many children live with you

The Earned Income Tax Credit (EITC) is a federal tax credit that works backward from most deductions. Instead of lowering your taxable income, it directly reduces the tax you owe. If the credit is larger than what you owe, the IRS sends you the difference as a refund — even if you paid nothing in taxes during the year.

The amount you receive depends on two things: your income for the year and whether you have dependent children. A single person with no children can receive up to a few hundred dollars. A person with three or more may have access to children can receive several thousand dollars. The credit phases out as your income rises, meaning you receive less the more you earn, until you earn too much to may have access to at all.

You claim the EITC on your tax return using Form 1040 and Schedule EIC. You do not have to file a separate process with the IRS. If you use tax software or work with a tax preparer, they will ask you questions about your income and dependents, and the software or preparer will calculate whether you may have access to and how much you receive.

Key Takeaways

  • The EITC is a refundable credit, meaning you can receive money back even if you owe no taxes.
  • The amount you receive depends on your income and the number of may have access to children in your household.
  • You claim the credit on your tax return using Schedule EIC attached to Form 1040.
  • Income limits vary by filing status and number of dependents, and change each year.
  • If you earned less than roughly $60,000 in the tax year, you may be within the income range to receive the credit.

Income limits and credit amounts change every year

The IRS adjusts the EITC income limits and maximum credit amounts each year for inflation. For the 2023 tax year (the return you file in 2024), the income limits and credit amounts are different from 2022. The IRS publishes these numbers in January or February each year on its website and in the instructions to Form 1040.

Generally, the credit is larger for people with children than for people without. A single filer with no may have access to children might have an income limit around $17,000 and a maximum credit of a few hundred dollars. A single filer with one may have access to child might have an income limit around $43,000 and a maximum credit of several thousand dollars. A single filer with three or more may have access to children might have an income limit around $56,000 and a maximum credit of several thousand dollars.

These numbers vary by filing status. Married couples filing jointly have higher income limits than single filers. Head of household filers fall in between. You need to check the current year's numbers for your specific situation — do not use last year's limits.

Who counts as a may have access to child for the EITC

A child must meet four tests to count toward your EITC: relationship, age, residency, and citizenship. The child must be your son, daughter, stepchild, foster child, or a descendant of any of these (such as a grandchild). The child must be under age 17 at the end of the tax year. The child must live with you for more than half the year. The child must be a U.S. citizen, national, or resident alien.

A child who does not meet all four tests cannot increase your EITC, even if you claim them as a dependent for other purposes. If you have a dependent parent or sibling living with you, they do not count as a may have access to child for the EITC, but you may still be able to claim the credit as a person with no may have access to children.

If you have multiple children who meet the tests, each one increases your credit amount. The credit is larger with two children than with one, and larger with three or more than with two.

How to report the EITC on your tax return

You report the EITC using Schedule EIC, which you attach to Form 1040. On Schedule EIC, you list the name, Social Security number, date of birth, and relationship of each may have access to child. You also enter your earned income for the year — wages from a job, net profit from self-employment, or both.

If you use tax software such as TurboTax, H&R Block, or TaxAct, the software will ask you questions about your income and dependents and will automatically calculate your EITC and fill in Schedule EIC for you. You do not have to do the math yourself. If you work with a tax preparer or CPA, they will gather this information from you and prepare the schedule.

You must have a valid Social Security number for yourself and for each may have access to child in order to claim the credit. If you do not have a number, you cannot claim the EITC for that year, even if you are otherwise within the income limits.

What counts as earned income for the EITC

Earned income means money you received for work. It includes wages, salaries, and tips from a job. It includes net profit from self-employment or a business you own. It does not include investment income, interest, dividends, rental income, Social Security benefits, unemployment benefits, or welfare payments.

If you have both a W-2 job and self-employment income, you add both together to calculate your total earned income for the EITC. If you received a W-2 from an employer, the wages shown in Box 1 of the W-2 count as earned income. If you are self-employed, your net profit (revenue minus business expenses) counts as earned income.

If you earned no money during the year, you do not may have access to for the EITC. You must have at least some earned income to claim the credit, even if you have may have access to children.

The EITC phases out as your income rises

The credit does not drop to zero the moment you exceed the income limit. Instead, it phases out gradually. As your earned income increases above a certain threshold, your credit amount decreases by a set percentage for each additional dollar you earn. Once your income reaches the upper limit, your credit becomes zero.

This means two people with the same number of children might receive different credit amounts if they earned different amounts. A person who earned $30,000 receives more than a person who earned $40,000, even though both have the same child. The phase-out range is wider for people with children than for people without.

The phase-out thresholds and rates change each year along with the income limits and maximum credit amounts. Tax software and tax preparers calculate the phase-out automatically — you do not have to do this calculation by hand.

What happens after you claim the EITC

When you file your tax return with the EITC claimed, the IRS processes your return like any other. If you owe taxes, the credit reduces what you owe. If the credit is larger than what you owe, the IRS sends you the difference as a refund, usually by direct deposit or check within two to three weeks of processing your return.

The IRS may verify your information by sending you a letter asking for proof of your income, your children's ages, or their relationship to you. If this happens, you will need to provide documents such as birth certificates, pay stubs, or a lease showing your address. Respond to the IRS letter within the important date given, or your credit may be reduced or denied.

If you received an EITC refund in a prior year and the IRS later found that you did not may have access to, you may have to repay part or all of the credit. This is why it is important to keep records of your income and your children's information for at least three years after you file.

Frequently Asked Questions

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

Yes. Your net profit from self-employment counts as earned income for the EITC. You calculate net profit by subtracting your business expenses from your business revenue, and you report this on Schedule C. Self-employed people with may have access to children can receive the same credit amounts as W-2 employees with the same income and children.

What if my child's other parent also claims them on a tax return?

Only one person can claim a child as a dependent and for the EITC in a given year. If both parents claim the same child, the IRS will disallow the credit for one of you. The person with the higher adjusted gross income usually keeps the credit. You may want to coordinate with the other parent before filing to avoid this conflict.

Do I have to file a tax return to get the EITC?

Yes. The EITC is claimed on your tax return, not through a separate process. Even if you earned very little and would not normally have to file, you must file a return to receive the EITC refund. Tax software and many tax preparers offer free filing for low-income people.

Can I claim the EITC if I have no children?

Yes, but the credit amount is much smaller. A single person with no may have access to children can receive a few hundred dollars if their earned income is within the limit. The income limit for people without children is lower than for people with children, and the maximum credit is smaller.

What if I made a mistake on my EITC claim last year?

You can file an amended return using Form 1040-X to correct the error. If you claimed the credit incorrectly and received money you were not may have access to to, you will owe it back. If you did not claim the credit when you should have, you can file the amended return to receive the credit you missed, as long as you are within the time limit to amend (usually three years).