Save Money With the Earned Income Tax Credit
Do you know about tax credits? These are fixed amounts of money that you can qualify for to lower your taxes. If you don’t claim credits that you’re eligible for, you’ll end up paying more money at tax time than you need to.
One tax credit that can save you thousands of dollars is the Earned Income Tax Credit. Millions of people miss out on this money-saving credit every year. Here’s what to know so you don’t lose this opportunity to save.
(Don't forget, the free Stride app can help you save thousands of dollars on your tax bill and hours of tax prep time by automatically tracking your miles and expenses, surfacing money-saving deductions, and getting your forms IRS-ready. Get it today!)
What Is the Federal Earned Income Tax Credit?
Last year, more than 23 million people qualified for the Federal Earned Income Tax Credit (EITC). Those who received the credit saved an average of $2,541. The EITC lowers taxes for low- and middle-income workers. Many people think they have to be a full-time employee to qualify, but that’s not true. Self-employed workers can receive this credit, too.
This year, people who are eligible for the Federal EITC can get up to:
$7,430 if they have three or more qualifying children
$6,604 if they have two children
$3,995 if they have one child
$600 if they have no children
The actual credit amount you’ll receive is based on your family size and income level.
You get to subtract the exact amount you qualify for from any federal income tax you owe. If the credit ends up being more than your taxes, you keep the rest of the money as a cash refund.
Who Gets the Federal Earned Income Tax Credit?
To qualify for the Federal EITC, you need to pass three important steps.
1. Make Sure You Meet the Requirements
The IRS has strict requirements for people who want to cash in on the EITC. You (and your spouse) must:
File taxes as an individual OR married filing jointly
Have a valid Social Security Number
NOT have a parent/guardian claiming you as a dependent on their tax return
Have resided in the U.S. for more than half the year
Be at least 25 but under 65 by the end of the year
Have earned some income (but not too much) in 2023
Have less than $11,000 or less in investments (like stocks or rental properties)
2. Make Sure Your Kids Meet the Requirements
You don’t need to have children to qualify for the EITC, but the more children you have, the larger credit you can receive. Each of your children must:
Be related to you by birth, marriage, or adoption, or placed in your care by an authorized foster placement agency
Be 18 years old or younger by the end of the year (or up to 24 years if they’re a full-time student for at least five months of the year)
Live with you in the U.S. for more than half the year
Have a Social Security Number
3. Make Sure Your Income Is Under the Limit
The main rule here is that the less you earn, the bigger tax credit you’re eligible for. If you make too much money, you won’t qualify for the EITC at all.
You’ll first need to calculate two different types of income:
| Earned Income Any type of money you earn from work, like wages, salaries, and tips. This includes self-employed work like driving for Uber, dog-walking, or delivering food. |
Adjusted Gross Income (AGI) Your earned income AND your unearned income (money from things like gambling or child support), minus your deductions and business expenses. |
|---|
Learn how to calculate your AGI here.
Your earned income and AGI need to each be less than the cutoffs below. The IRS will consider how much money you could get back based on your earned income vs. your AGI, then give you whichever credit amount is lower.
For taxes due in April 2023, the limits are:
| Number of Qualifying Children | Maximum Earnings Single, Head of Household, or Qualifying Widow(er) |
Maximum Earnings Married Filing Jointly |
|---|---|---|
| 0 | $17,640 | $24,210 |
| 1 | $46,560 | $53,120 |
| 2 | $52,918 | $59,478 |
| 3 or more | $56,838 | $63,698 |
For a quick way to see if you qualify for the EITC, use this IRS calculator.
How Do I Claim the Federal Earned Income Tax Credit?
How you claim this tax credit depends on how you file your taxes.
If you’re using tax software: Most softwares will automatically calculate this credit for you based on the income information you provide. In fact, if you’re eligible for the EITC, you can use free online tax prep through the IRS Free File program.
If a tax preparer is filing for you: Tax professionals will know to be on the lookout for this credit and should do all the work for you!
If you’re filing your taxes yourself: You’ll have to do a little extra work. Follow the detailed IRS instructions for line 18a of Form 1040 (page 38 of this document).
Learn more about your tax filing options and what they cost here.
Other Things To Know
Here are some extra EITC tips you don’t want to miss:
Check your eligibility every year. Even if you qualify for the EITC one year, certain life changes like getting a new job or getting married may mean you’re no longer eligible.
Make sure you’re honest. If you intentionally lie to receive a bigger credit, you’ll have to pay the money back and the IRS could ban you from the EITC for up to 10 years.
Californians: Save Even More With the CalEITC
Live in California? You may be eligible for a California Earned Income Tax Credit (CalEITC) up to $3,529 for tax year 2023 as a working family or individual earning up to $30,950 per year. You must claim the credit on the 2023 FTB 3514 form, California Earned Income Tax Credit, or if you e-file follow your software's instructions.
Golden State Opportunity (GSO) is dedicated to helping you understand if you qualify. Find out if you’re eligible with this calculator tool and then file your taxes for FREE.
Golden State Opportunity (GSO) is a nonprofit dedicated to ending poverty by providing all Californians with the tools to build financial security and thrive. Their central program is CalEITC4Me, a public-private campaign focused on the California Earned Income Tax Credit (CalEITC).
