Earned Income Tax Credit (EITC)

The Basics

The Earned Income Tax Credit (EITC) is a federal tax program that reduces the amount of income tax owed by low to moderate income workers and families. Even people who don’t earn enough to owe federal income taxes may get a refund from the Internal Revenue Service (IRS) if they qualify for an EITC.

The EITC for tax year 2021 (filing by April 2022) ranges from $2 to $6,728. To qualify, you must have income from employment, self-employment, or employer-paid disability benefits received prior to retirement. There is no limit to the number of times you can claim an EITC; you can claim one every year that you qualify. Families with a permanently and totally disabled child will always qualify for an EITC, as long as they meet other program requirements. Those requirements are discussed in this article and can be found on the IRS website.

DB101 has been updated for tax changes in the 2021 American Rescue Plan (ARP) Act. For 2021 taxes (due in April, 2022), you could get a much higher Earned Income Tax Credit (EITC) or Child Tax Credit. Make sure you file your taxes, even if you don't owe anything, so that you get these credits.

The state Earned Income Tax Credit

There is also an Earned Income Tax Credit for California state income taxes. The California Franchise Tax Board has more information about the state EITC.

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