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The Earned Income Tax Credit (EITC): An Overview

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The Earned Income Tax Credit (EITC): An Overview

April 11, 201718, 2018 (R43805)
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Summary

The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers earning relatively low wages. Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefit. Eligibility for and the amount of the EITC are based on a variety of factors, including residence and taxpayer ID requirements, the presence of qualifying children, age requirements for childless recipients, and the recipient's investment income and earned income. Tax filers with income above certain thresholds—these thresholds are based on marital status and number of qualifying children—are ineligible for the credit.

The EITC varies based on a recipient's earnings. Specifically, the EITC equals a fixed percentage (the "credit rate") of earned income until the credit amount reaches its maximum level. The EITC then remains at its maximum level over a subsequent range of earned income, between the "earned income amount" and the "phase-out amount threshold." Finally, the credit gradually decreases to zero at a fixed rate (the "phase-out rate") for each additional dollar of adjusted gross income (AGI) (or earningsearned income, whichever is greater) above the phase-out amount threshold. The specific values of these EITC parameters (e.g., credit rate, earned income amount) vary depending on several factors, including the number of qualifying children a tax filer has and his or her marital status. For the 20172018 tax year, the maximum EITC for a tax filer without children is $510519 per year. In contrast, the 20172018 maximum EITC for a tax filer with one child is $3,400461 per year; for two children, $5,616716 per year; and for three or more children, $6,318431 per year.

Two temporary modifications to the EITC were enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), extended by P.L. 111-312 and P.L. 112-240, and made permanent by the Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113). The first modification was a larger credit for families with three or more children, while the second reduced the EITC's marriage penalty.

The EITC is provided to individuals and families once a year, in a lump sum payment after individuals and families file their federal income tax returns. The credit may be received in one of three ways: (1) a reduction in federal tax liability; (2) a refund from the Treasury if the tax filer has no income tax liability; or (3) a combination of a reduced federal tax liability and a refund. The amount of the credit a tax filer receives is based on the prior year's income, earnings, and family composition (marital status and number of qualifying children). That is, the EITC earned based on 2017 earnings2018 earned income will not be paid until 20182019.

The EITC cannot be counted as income in determining eligibility for or the amount of any federally funded public benefit program. An EITC refund that is saved by a tax filer does not count against the resource limits of any federally funded public benefit program for 12 months after the refund is received.

For tax year 20142015 (returns filed in 20152016), a total of $68.35 billion was claimed by 28.51 million tax filers (19% of all tax filers), making the EITC the largest need-tested antipoverty cash assistance program. In that year, 97% of all EITC dollars were claimed by families with children. However, there was considerable variation in the share of returns claiming the EITC by state, with a greater share filed in certaincertain southern states compared to other regions of the country.


The Earned Income Tax Credit (EITC): An Overview

Introduction

Did P.L. 115-97 modify the EITC?

At the end of 2017, President Trump signed into law P.L. 115-97,1 which made numerous changes to the federal income tax for individuals and businesses.2 The final law did not make any direct changes to the EITC.

The law did however indirectly affect the credit's value in future years. Parameters of the EITC (see Table 1) are indexed to inflation. Prior to P.L. 115-97, this measure of inflation was based on the consumer price index for urban consumers (CPI-U). P.L. 115-97 changed this inflation measure to be permanently based on the chained CPI-U (C-CPI-U).3 In comparison to CPI-U, chained CPI-U tends to grow more slowly. Hence, over time, the monetary parameters of the EITC will increase more slowly. The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers with relatively low earnings. Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefit. The credit is authorized by Section 32 of the Internal Revenue Code (IRC) and administered as part of the federal income tax system. For tax year 20142015 (returns filed in 20152016), a total of $68.35 billion was claimed by 28.51 million tax filers, making the EITC the largest need-tested antipoverty cash assistance program.

Under current law, the EITC is calculated based on a recipient's earned income, using one of eight different formulas, which vary depending on several factors, including the number of qualifying children a tax filer has (zero, one, two, or three or more) and his or her marital status (unmarried or married). All else being equal, the amount of the credit tends to increase with the number of eligible children the EITC claimant has. Indeed, most of the benefits of the EITC—97% of EITC dollars for 20142015—go to families with children.

Two temporary modifications to the EITC were enacted under the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5), extended by P.L. 111-312 and P.L. 112-240, and made permanent by the Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113). The first modification was a larger credit for families with three or more children, while the second reduced the EITC's marriage penalty.

This report provides an overview of the EITC, first discussing eligibility requirements for the credit, followed by how the credit is computed and paid. The report then provides data on the growth of the EITC since it was first enacted in 1975. Finally the report concludes with data on the EITC claimed on 20142015 tax returns, examining EITC claims by number of qualifying children, income level, tax filing status, and location of residence.

Eligibility for the EITC

A tax filer must fulfill the following requirements to claim the EITC:

  • 1. The tax filer must file a federal income tax return.14
  • 2. The tax filer must have earned income.
  • 3. The tax filer must meet certain residency and identification requirements.
  • 4. The tax filer's children must meet relationship, residency, and age requirements to be considered qualifying children for the credit.
  • 5. Childless workers who claim the credit must be between ages 25 and 64. (This age requirement does not apply to EITC claimants with qualifying children.)
  • 6. The tax filer's investment income must be below a certain amount.
  • 7. The tax filer must not be disallowed the credit due to prior fraud or reckless disregard of the rules when they previously claimed the EITC.

  • 8. The tax filer must provide the Social Security number for themselves, their spouse, if married, and any children for whom the credit is claimed.
  • Additionally, a tax filer with income above a certain dollar amount (labelledlabeled as "income where credit = 0" in Table 1) will be ineligible for the credit. Given that this income level is dependent on the number of qualifying children and marital status of the tax filer, this requirement is discussed in greater detail in the section of the report entitled "Calculating the EITC."

    Requirements (1) through (78) are discussed in detail below.

    Filing a Federal Income Tax Return

    To be eligible for the EITC, a person must file a federal income tax return. Those who do not file a federal income tax return cannot receive the EITC.

    The EITC can be claimed by taxpayers filing their tax return as married filing jointly, head of household, or single.25 Tax filers cannot claim the EITC if they use the filing status of married filing separately. If the tax filer has a qualifying child, the tax filer must include the child's name and Social Security number on a separate schedule (Schedule EIC) filed with the federal tax return.3

    6

    Earned Income

    A tax filer must have earned income to claim the EITC. Earned income for the EITC is defined as wages, tips, and other compensation included in gross income. It also includes net self-employment income (self-employment income after deduction of one-half of Social Security payroll taxes paid by a self-employed individual).

    In addition, servicemembers may elect to include combat pay in their earningsearned income when calculating the EITC. All income earned by a member of the Armed Forces while in a designated combat zone is considered combat pay and is normally not included in taxable income. However, a tax filer may elect to include combat pay as earningsearned income for the purpose of calculating the EITC.47 Generally, servicemembers will make this election if it results in a larger credit. (Using combat pay to calculate the EITC does not make the combat pay taxable income.)

    Certain forms of income are not considered earningsearned income for the purpose of the EITC. These include pension and annuity income, income of nonresident aliens not from a U.S. business, income earned while incarcerated for work in a prison, and TANF benefits paid in exchange for participation in work experience or community service activities.

    Finally, tax filers who claim the foreign earned income exclusion (i.e., they file Form 2555 or Form 2555EZ with their federal income tax return) are ineligible to claim the EITC.5

    8

    Residency and Identification Requirements

    Requirements

    Under current law, an EITC recipient must be a resident of the United States, unless the recipient resides in another country because of U.S. military service. To be eligible for the credit, the tax filer must provide valid Social Security numbers (SSNs) for work purposes6 for themselves, spouses if married filing jointly, and any qualifying children. (U.S. citizenship is not required to be eligible for the credit. SSNs do not indicate U.S. citizenship.) Nonresident aliens—those who do not have green cards or do not spend sufficient time in the United States—are generally ineligible for the EITC.7.

    Qualifying Children

    An EITC recipient's qualifying child must meet three requirements.89 First, the child must have a specific relationship to the tax filer (son, daughter, step child or foster child,910 brother, sister, half-brother, half-sister, step brother, step sister, or descendent of such a relative). Second, the child must share a residence with the taxpayer for more than half the year in the United States.1011 Third, the child must meet certain age requirements; namely, the child must be under the age of 19 (or age 24, if a full-time student) or be permanently and totally disabled.

    As a result of these three requirements, a child may be the qualifying child of more than one tax filer in the same household. For example, a child who lives with a single parent, grandparent, and aunt in the same home could be a qualifying child of all three of these individuals. But only one of these individuals can claim the qualifying child for the EITC, and the others cannot. Indeed, it appears that under current law, the other individuals are also ineligible to claim the childless EITC.1112 In the case where the tax filers cannot agree on who claims the child, there are "tie-breaker" rules for who can claim the child for the EITC.12

    13

    Age Requirements for EITC Recipients with No Qualifying Children

    If a tax filer has no qualifying children, he or she must be between 25 and 64 years of age to be eligible for the EITC. There is no age requirement for tax filers with qualifying children.

    Investment Income

    A tax filer with investment income over a certain dollar amount is ineligible for the EITC. The statutory limit—$2,200—is adjusted annually for inflation. For 20172018, the limit on investment income is $3,450500. Investment income is defined as interest income (including tax-exempt interest), dividends, net rent, net capital gains, and net passive income. It also includes royalties that are from sources other than the filer's ordinary business activities.

    Disallowance of the EITC Due to Fraud or Reckless Disregard of Rules

    A tax filer is barred from claiming the EITC for a period of 10 years after the IRS makes a final determination to reduce or disallow a tax filer's EITC because that individual made a fraudulent EITC claim. A tax filer is barred from claiming the EITC for a period of two years after the IRS determines that the individual made an EITC claim "due to reckless and intentional disregard of the rules" of the EITC, but that disregard was not found to be fraud.13

    14 Identification Requirements

    To be eligible for the credit, the tax filer must provide valid Social Security numbers (SSNs) for work purposes15 for themselves, spouses if married filing jointly, and any qualifying children. The SSNs must be issued before the due date of the income tax return.16 (U.S. citizenship is not required to be eligible for the credit. SSNs do not indicate U.S. citizenship.) Nonresident aliens—those who do not have green cards or do not spend sufficient time in the United States—are generally ineligible for the EITC.17

    Calculating the EITC

    The EITC amount is based on formulas that consider earned income, number of qualifying children, marital status, and adjusted gross income (AGI). In general, the EITC equals a fixed percentage (the "credit rate") of earned income until the credit reaches its maximum amount. The EITC then remains at its maximum level over a subsequent range of earned income, between the "earned income amount" and the "phase-out amount threshold." Finally, the credit gradually decreases in value to zero at a fixed rate (the "phase-out rate") for each additional dollar of earningsearned income or AGI (whichever is greater) above the phase-out amount threshold. The specific values of these EITC parameters (e.g., credit rate, earned income amount, etc.) vary depending on several factors, including the number of qualifying children a tax filer has and his or her marital status, as illustrated in Table 1.

    Table 1. EITC Tax Parameters by Marital Status
    and Number of Qualifying Children for 2017

    2018

    Number of Qualifying Children

    0

    1

    2

    3 or more

    unmarried tax filers (single and head of household filers)

    credit rate

    7.65%

    34%

    40%

    45%

    earned income amount

    $6,670

    780

    $10,000

    180

    $14,040

    290

    $14,040

    290

    maximum credit amount

    $510

    519

    $3,400

    461

    $5,616

    716

    $6,318

    431

    phase-out amount threshold

    $8,340

    490

    $18,340

    660

    $18,340

    660

    $18,340

    660

    phase-out rate

    7.65%

    15.98%

    21.06%

    21.06%

    income where credit = 0

    $15,010

    270

    $39,617

    40,320

    $45,007

    802

    $48,340

    49,194

    married tax filers (married filing jointly)

    credit rate

    7.65%

    34%

    40%

    45%

    earned income amount

    $6,670

    780

    $10,000

    180

    $14,040

    290

    $14,040

    290

    maximum credit amount

    $510

    519

    $3,400

    461

    $5,616

    716

    $6,318

    431

    phase-out amount threshold

    $13,930

    14,170

    $23,930

    24,350

    $23,930

    24,350

    $23,930

    24,350

    phase-out rate

    7.65%

    15.98%

    21.06%

    21.06%

    income where credit = 0

    $20,600

    950

    $45,207

    46,010

    $50,597

    51,492

    $53,930

    54,884

    Source: IRS Revenue Procedure 2016-552018-18 and Internal Revenue Code (IRC) Section 32.

    As illustrated in Table 1, the EITC's earned income amounts, credit rates, phase-out rates, and maximum credit amounts vary by the number of qualifying children a tax filer has. The EITC ranges from a maximum credit of $510519 for a tax filer without a child to $6,318431 for a tax filer with three or more qualifying children, as illustrated in Figure 1.

    Figure 1. Maximum EITC by Number of Qualifying Children: 2017

    2018

    Source: Congressional Research Service, based on IRS Revenue Procedure 2016-552018-18 and Internal Revenue Code (IRC) Section 32.

    The phase-out amount threshold varies by both the number of qualifying children a tax filer has and his or her marital status. The phase-out amount threshold for those who are married filing joint returns is $5,590690 greater than for unmarried filing statuses with the same number of children. (Tax filers who file as married filing separately are ineligible for the EITC.) This higher phase-out amount threshold for married tax filers reduces (but generally does not eliminate) potential "marriage penalties" in the EITC whereby the credit for a married couple is less than the combined credit of two unmarried recipients.

    Figure 2 illustrates the EITC amount by earningsearned income level for an unmarried taxpayer with one child for 20172018. It shows the three distinct ranges of EITC for this family:

    • Phase-in Range: The EITC increases with earningsearned income from the first dollar of earningsearned income up to earnings of $10,000180. Over this earningsearned income range, the credit equals the credit rate (34% for a tax filer with one child) times the amount of annual earningsearned income. The $10,000180 threshold is called the earned income amount and is the earnings level at which the EITC ceases to increase with earned income. The income interval up to the earned income amount, where the EITC increases with earningsearned income, is known as the phase-in range.
    • Plateau: The EITC remains at its maximum level of $3,400461 from the earned income amount ($10,000180) until earnings exceed $18,340)660. The $3,400461 credit represents the maximum credit for a tax filer with one child in 20172018. The income interval with the EITC fixed at its maximum value represents the plateau on Figure 2.
    • Phase-out Range: Once earnings exceed $18,340adjusted gross income (or if greater, earned income) exceeds $18,660, the EITC is reduced for every additional dollar over that amount. The $18,340660 threshold is known as the phase-out amount threshold for a single taxpayer with one child in 20172018. For each dollar over the phase-out amount threshold, the EITC is reduced by 15.98%. The 15.98% rate is known as the phase-out rate. The income interval from the phase-out income level until the EITC is completely phased out is known as the phase-out range.

    The EITC is completely phased out (EITC = $0) once the tax filer's AGI (or earned income, whichever is greater) reaches $39,61740,320. The earned income amounts and the phase-out amount thresholds are adjusted each year for inflation.

    Figure 2. Amount of the EITC for an Unmarried Tax Filer with One Child, 2017

    2018

    Source: Congressional Research Service, based on information in IRS Revenue Procedure 2016-552018-18 and Internal Revenue Code Section 32.

    In this simplified example, adjusted gross income (AGI) is assumed to equal earned income.

    In practice, EITC claimants use tables published by the IRS to calculate their credit amount. A tax filer can look up the correct amount of his or her EITC based on income, marital status, and number of qualifying children. The instructions for the federal income tax form1418 show the EITC amounts in tables by income brackets (in $50 increments).

    Income Limits for the EITC

    As previously discussed, the amount of the EITC is reduced for each dollar of AGI (or earningsearned income, if greater) above a certain dollar threshold, referred to as the phase-out amount threshold. That threshold, combined with the phase-out rate, results in a specific income level (referred to as "income where credit = 0" in Table 1) above which a tax filer is ineligible for the credit. This income level, where the credit reaches zero, is sometimes referred to as the eligibility threshold.

    As illustrated in Table 1, there are eight eligibility thresholds for the EITC depending on the number of qualifying children a taxpayer has and his or her marital status. The eligibility thresholds vary every year given that they are based in part on a parameter of the credit—the phase-out amount threshold—that is explicitly adjusted for inflation. Table 2 shows the EITC eligibility thresholds for 20172018. An EITC claimant's AGI (or earningsearned income, if higher) must be below these thresholds for the claimant to qualify for the EITC. In 20172018, these thresholds range from $15,010270 for an unmarried tax filer with no qualifying child to $53,93054,884 for a married tax filer filing jointly with three or more qualified children.

    Table 2 expresses these eligibility thresholds as a percentage of the 20172018 poverty guidelines. For example, the poverty guideline for a family of three in 20162018 was $20,420780. Families of three with income at or below this amount are considered poor. The EITC eligibility threshold of $45,007802 for an unmarried person filing jointly with two qualifying children was more than twice (220.4%) the poverty guideline for a family of that type.

    Table 2 also expresses these eligibility thresholds as a percentage of the earnings of one worker who works a minimum wage job ($7.25 per hour) 40 hours per week, 52 weeks a year ($15,080 annually). For the purposes of the calculations in Table 2, married EITC recipients are assumed to have the same aggregate annual earnings as unmarried recipients—$15,080. The EITC is available in 2017 to all families at this earnings level except an unmarried taxpayer with no children. The EITC was2018 to all families. It is available to families with children who hadhave earnings between 2.67 to 3.6 times the annual earnings from a minimum wage job (262.7% to 357.6267.4% to 364.0% of $15,080).

    Table 2. Maximum AGI to Qualify for the EITC, by Number of Qualifying Children and Filing Status in 2017

    2018
     

    No Qualifying Children

    One Qualifying Child

    Two Qualifying Children

    Three or More Qualifying Children

    Unmarried

    $15,010

    270

    $39,617

    40,320

    $45,007

    802

    $48,340

    49,194

    Married Filing Jointly

    20,600

    950

    45,207

    46,010

    50,597

    51,492

    53,930

    54,884

    As a percentage of the poverty threshold

     

    Unmarried

    124.5125.8%

    243.9245.0%

    220.4%

    196.50%a

    Married Filing Jointly

    126.8

    127.3

    221.4

    205.7

    1

    187.4186.6b

    As a percentage of work at the federal minimum wage, 40 hours per week, 52 weeks per year

    Unmarried

    99.5101.3%

    262.7267.4%

    298.5303.7%

    320.6326.2%

    Married Filing Jointly

    136.6

    138.9

    299.8

    305.1

    335341.5

    357.6

    364.0

    Source: Congressional Research Service calculations, based on IRS Revenue Procedure 2016-552018-18, Internal Revenue Code (IRC) Section 32 and the 20172018 Poverty Guidelines available at https://aspe.hhs.gov/poverty-guidelines.

    a. Represents the EITC AGI threshold divided by the poverty guidelines for a family of 4

    b. Represents the EITC AGI threshold divided by the poverty guidelines for a family of 5.

    Payment of the EITC

    The EITC is provided to individuals and families annually in a lump sum payment after a taxpayer files a federal income tax return.1519 It may be received in one of three ways:

    • 1. a reduction in federal tax liability;
    • 2. a cash payment from the Treasury if the tax filer has no tax liability, through a tax refund check; or
    • 3. a combination of reduced federal tax liability and a refund.

    The majority (86%) of the aggregate amount of the EITC—$68.35 billion for 20142015—is received as a refund.1620 In other words, $58.98 billion of the EITC was received as a refund for 2014, while approximately $9.57 billion offset tax liabilities.

    The EITC is taken against all taxes reported1721 on the federal individual income tax return (Form 1040) after all nonrefundable credits have been taken. On the tax form, the EITC can be found in the payments section after the lines for withholding and estimated tax payments.

    The EITC benefits families when they file their income taxes. Thus, payments are generally based on the prior year's income, earnings, and family composition. That is, the EITC earned in 20172018, based on a tax filer's earnings, income, and family composition, will be paid in 2018.182019.22 If the tax filer is owed a refund, and that filer's return includes an EITC, that refund will be made on or after February 15.19

    23

    Interaction with Other Tax Provisions

    On the tax return, the EITC is calculated after total tax liability and all nonrefundable credits. Nonrefundable tax credits, which are taken against (reduce) income tax liability, include credits for education, dependent care, savings, and the nonrefundable portion of the child credit.2024 If an EITC-eligible family has a tax liability and can use one or more of these credits, the total amount of their EITC will remain unchanged, but how they receive the credit will change. If nonrefundable tax credits can reduce a family's tax liability, a greater amount of their EITC will be received as a refund, and less will offset their tax liability since their tax liability is smaller.

    For tax filers whose income places them in the "phase-out range" of the credit, reducing their income (all else being unchanged) will result in a larger EITC. (As illustrated in Figure 2, reducing income when a tax filer is in the phase-out range results in the tax filer increasing the amount of the credit they receive.) A variety of forms of income can be excluded from both AGI and earned income, reducing a taxpayer's AGI or earned income for purposes of calculating the credit. For example, pretax contributions to savings accounts for retirement or medical expenses are not included in either AGI or earned income. Hence, by making these contributions, EITC claimants whose precontribution income places them in the phase-out range of the credit will reduce their AGI or earned income for purposes of calculating the EITC and thus receive a larger credit.2125 

    In contrast, for tax filers whose earned income places them in the "phase-in range" of the credit, reducing their earned income (all else unchanged) will result in a smaller EITC. (As previously discussed, the phase-in range of the credit is over a range of earned income, while the credit phases out based on adjusted gross income or earned income, whichever is greater.) As illustrated in Figure 2, reducing income when a tax filer is in the phase-in range results in the tax filer reducing the amount of the credit they receive.) Generally, nontaxable income cannot be included in earned income for purposes of calculating the EITC. However, as previously discussed, servicemembers may elect to include their nontaxable combat pay as earningsearned income, for purposes of calculating the EITC. Generally, servicemembers whose income (excluding their combat pay) places them in the phase-in range will elect to include their combat pay in earned income for purposes of calculating the EITC in order to receive a larger credit.

    Treatment of the EITC for Need-Tested Benefit Programs

    By law,2226 the EITC cannot be counted as income in determining eligibility for, or the amount of, any federally funded public benefit program including Supplemental Nutrition Assistance Program (SNAP) food assistance, low-income housing, Medicaid, Supplemental Security Income (SSI), and Temporary Assistance for Needy Families (TANF). An EITC refund that is saved by the filer does not count against the resource limits of any federally funded public benefit program for 12 months after the refund is received.

    Modifications to the EITC Made Permanent by
    P.L. 114-113

    Two temporary modifications to the EITC were enacted by the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). First, ARRA enacted a temporary larger credit for families with three or more children by creating a new higher credit rate of 45% (previously, these tax filers were eligible for a credit rate of 40%). Second, ARRA expanded marriage penalty relief by increasing the earningsearned income level at which the credit phased out for married tax filers in comparison to unmarried tax filers with the same number of children. Before ARRA, the EITC for married tax filers would begin to phase out for earningsearned income $3,000 (adjusted for inflation) greater than the level for unmarried recipients with the same number of children. ARRA increased this differential to $5,000 (adjusted for inflation). In 20172018, this marriage penalty relief was equal to $5,590690. These two changes were originally scheduled to be in effect only for 2009 and 2010. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) extended these ARRA provisions for two years (2011 and 2012). The American Taxpayer Relief Act (ATRA; P.L. 112-240) extended the ARRA provisions for five more years (2013-2017). The Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113) made these two modifications permanent.

    Participation and Benefits

    The EITC was first enacted in 1975 as a temporary measure meant to encourage economic growth in the face of the 1974 recession and rising food and energy prices. It was also originally intended to "assist in encouraging people to obtain employment, reducing the unemployment rate, and reducing the welfare rolls."2327 Over time the list of EITC objectives has grown to include poverty reduction. Today the EITC is the largest need-tested, cash benefit antipoverty program. This section first provides a historical overview of the growth of the EITC for tax years 1975 to 20142015; it then examines information on EITC participation for 20142015.

    Trends in Participation and EITC Benefits

    When originally enacted by the Tax Reduction Act of 1975 (P.L. 94-12), the EITC was a temporary refundable tax credit in effect for 1975. For that year, 6.2 million tax filers claimed the EITC and the total EITC amount claimed was $1.25 billion (in constant 20142015 dollars, this equals $5.5 billion). The credit was extended several more times on a temporary basis and made permanent by the Revenue Act of 1978 (P.L. 95-600). Legislation enacted in 1986 (P.L. 99-514), 1990 (P.L. 101-508), 1993 (P.L. 103-66), 2001 (P.L. 107-16), and 2009 (P.L. 111-5) increased the amount of the credit by changing the credit formula.

    For more information on the legislative history of the EITC, see CRS Report R44825, The Earned Income Tax Credit (EITC): A Brief Legislative History, by [author name scrubbed].

    Before 1990, the credit amount was calculated as a percentage of earnings ("the credit rate") up until the earned income amount. The credit then remained at its maximum level before gradually decreasing in value as earningsearned income increased. Legislative changes to the credit made during this time generally increased the amount of the credit in a variety of ways including increasing the credit rate, increasing the earned income amount, increasing the phase-out amount threshold, and decreasing the phase-out rate. Nonetheless, the credit amount depended on earned income.

    Beginning in 1990 and more substantially in 1993, the credit formula was revised such that the credit amount varied based on earningsearned income and, to a certain extent, the number of qualifying children. This essentially increased the credit by family size. In addition, for the first time in 1993, Congress made workers without qualifying children eligible for the EITC, although the credit was smaller than the credit for claimants with qualifying children.

    In 2001, the credit formula was revised again so that it also varied based in part on marital status. As a result of this change, often referred to as "marriage penalty relief," certain married tax filers would receive a larger credit than unmarried tax filers with the same number of children. In 2009, the marriage penalty relief was expanded further and a larger credit was created for families with three or more children. These 2009 changes were extended several times and made permanent by P.L. 114-113.

    Figure 3 shows the number of tax filers claiming the EITC for 1975 to 20142015. Figure 4 shows the amount of the EITC claimed on these returns, with dollar amounts adjusted for inflation to represent 20142015 dollars. The figures show the effects of the legislative expansions of the EITC, with the credit experiencing growth in the late 1980s through the mid-1990s and then again in the 2000s. As shown on Figure 4, throughout the history of the EITC, most credits have been paid in the form of refunds, with a relatively small share of the EITC reducing regular federal income tax liability.

    Figure 3. Number of Tax Filers Claiming the EITC: 1975 to 2014

    2015

    Source: Congressional Research Service. For pre-2003 data, U.S. Congress, House Committee on Ways and Means, 2004 Green Book, Background Material and Data on Programs Within the Jurisdiction of the Committee on Ways and Means, 108th Congress, 2nd session, WMCP 108-6, March 2004, pp. 13-41. For 2003 and later data, Internal Revenue Service, Total File, United States, Individual Income and Tax Data, by State and Size of Adjusted Gross Income, 2003 through 2014, expanded unpublished version, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Note: For a tabular display of this information, see Table A-1.

    Figure 4. EITC Claimed on Federal Income Tax Returns: 1975-2014

    2015

    Source: Congressional Research Service. For pre-2003 data, U.S. Congress, House Committee on Ways and Means, 2004 Green Book, Background Material and Data on Programs Within the Jurisdiction of the Committee on Ways and Means, 108th Congress, 2nd session, WMCP 108-6, March 2004, pp. 13-41. For 2003 and later data, Internal Revenue Service, Total File, United States, Individual Income and Tax Data, by State and Size of Adjusted Gross Income, 2003 through 2014, expanded unpublished version, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Notes: Constant 20142015 dollars were computed using the Consumer Price Index for all Urban Consumers (CPI-U). For a tabular display of this information, see Table A-1.

    The growth in the total amount of EITC claimed in the late 1980s to the mid-1990s was due to increases not only in participation, but also in the average credit received by tax filers. Figure 5 shows the average EITC claimed for 1975 to 20142015, in inflation-adjusted (20142015) dollars. Before the 1986 Tax Reform Act (P.L. 99-514), EITC thresholds were not indexed for inflation, and the average credit lost value each year. However, the 1986 act increased the monetary parameters of the credit for prior inflation and adjusted the threshold amounts and maximum credits annually for inflation in future years. The credit formula was also revised in 1990 and then again in 1993 such that the amount of the credit depended to a certain extent on family size. These changes resulted in an increasing average credit between the late 1980s and late 1990s. Since then, the average credit has largely maintained its real value. However, increases in the average credit amount in 2001 and 2009 were likely due to legislative changes that included larger credits for some married claimants and for families with three or more children.2428 The average EITC claimed for 20142015 was $2,395440.

    Figure 5. Average EITC Claimed: 1975 to 2014

    2015

    Source: Congressional Research Service. For pre-2003 data, U.S. Congress, House Committee on Ways and Means, 2004 Green Book, Background Material and Data on Programs Within the Jurisdiction of the Committee on Ways and Means, 108th Congress, 2nd session, WMCP 108-6, March 2004, pp. 13-41. For 2003 and later data, Internal Revenue Service, Total File, United States, Individual Income and Tax Data, by State and Size of Adjusted Gross Income, 2003 through 2014, expanded unpublished version, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Notes: Constant 20142015 dollars were computed using the Consumer Price Index for all Urban Consumers (CPI-U). For a tabular display of this information, see Table A-1.

    Participation and EITC Amounts Claimed for 2014

    2015

    For 20142015, $68.35 billion of the EITC was claimed on 28.51 million tax returns.

    Number of Qualifying Children

    Most tax filers claiming the EITC, and those who received the most EITC dollars, were families with children. Figure 6 shows total EITC dollars claimed for 20142015 by number of qualifying children. For 20142015, 3% of all EITC dollars were claimed by tax filers with no qualifying children and 97% were claimed by tax filers with qualifying children. Of this 97%, 36% were claimed by tax filers with one qualifying child, 40% were claimed by tax filers with two qualifying children, and 21% were claimed by tax filers with three or more qualifying children.

    Figure 6. Total EITC Dollars Claimed for 20142015, by Number of Qualifying Children

    Dollars in Billions, Total EITC Claimed = $68.35 Billion

    Source: Congressional Research Service, based on data from the U.S. Department of Treasury, Internal Revenue Service, SOI Tax Stats - Individual Income Tax Returns, Internal Revenue Service, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Though childless tax filers claimed 3% of all EITC dollars for 2014, they accounted for 26% of all tax filers that claimed the EITC. Thus, their small share of total EITC dollars reflects, in part, the lower credit amount available to childless filers.

    Figure 7 shows the number of returns claiming the EITC for 20142015 by number of qualifying children. Figure 8 shows the average EITC claimed for 20142015 by number of qualifying children. The average EITC for 20142015 increased with the number of qualifying children a tax filer claimed:

    • The EITC was claimed by 7.43 million tax filers with no qualifying children, with an average claim of $287294.
    • The EITC was claimed by 10.53 million filers with one qualifying child, with an average claim of $2,381411.
    • The EITC was claimed by 7.21 million filers with two qualifying children, with an average claim of $3,754830.
    • The EITC was claimed by 3.4 million filers with three or more qualifying children, with an average claim of $4,107185.

    Figure 7. Number of Tax Returns with EITC Claims for 20142015,
    by Number of Qualifying Children

    Number in Millions, Total Number of Returns Claiming the EITC = 28.51 million

    Source: Congressional Research Service, based on data from the U.S. Department of Treasury, Internal Revenue Services, SOI Tax Stats - Individual Income Tax Returns, Internal Revenue Service, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Notes: Detail does not add to total because of rounding. For detail on returns claiming the EITC by AGI and number of qualifying children, see Table A-2.

    Figure 8. Average EITC Claimed by Tax Filers in 20142015
    by Number of Qualifying Children

    Source: Congressional Research Service, based on data from the U.S. Department of Treasury, Internal Revenue Services, SOI Tax Stats - Individual Income Tax Returns Publication 1304, Internal Revenue Service, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Note: For detail on returns claiming the EITC by AGI and number of qualifying children, see Table A-2.

    Income Level

    Though the EITC is targeted toward lower-income earners, tax filers with children may receive the EITC even with income well above the poverty level. (The federal poverty level for a family of three was $20,420 in 2014090 in 2015.) However, the largest EITC benefits are focused on low-income earners near the poverty line, with those with greater earnings receiving reduced benefits.

    Figure 9 shows the number of tax returns with EITC claims for 20142015 by adjusted gross income level. Figure 9 shows that the most typical (modal) EITC tax return had an AGI between $10,000 and $14,999, with 6.32 million returns including an EITC in that income range for 20142015. For that year, close to half (48.1%) of all returns with EITC claims had AGIs below $15,000. This AGI is equivalent to earnings less than the $15,080 earned by a full-time (40 hour per week) full-year (52 weeks per year) worker earning the federal minimum wage ($7.25 per hour).

    Figure 9 also shows the average EITC claimed by AGI category. Average EITC benefits first increase with AGI, then decline. This outcome reflects the formula for determining the EITC, which provides an increasing credit up to a maximum amount, then ultimately a reduced credit as it is phased out above a certain income threshold (see Table 1 and Figure 2). It also reflects a difference in the mix of family types claiming the EITC in the various AGI categories. For example, 7173% of all filers claiming the EITC with AGIs of less than $5,000 had no qualifying children. All those claiming the EITC at AGIs above $2025,000 in 20142015 had qualifying children, and hence were eligible for a larger maximum EITC benefit than filers without children. For detail on returns claiming the EITC by AGI and number of qualifying children, see Table A-2.

    Figure 9. Number of Returns Claiming the EITC and Average EITC Claimed for 20142015, by Adjusted Gross Income

    Numbers in Millions and 20142015 Dollars

    Source: Congressional Research Service, based on data from the U.S. Department of Treasury, Internal Revenue Services, SOI Tax Stats - Individual Income Tax ReturnsInternal Revenue Service, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Notes: For detail on returns claiming the EITC by AGI and number of qualifying children, see Table A-2.

    Filing and Marital Status

    The Internal Revenue Service does not provide data on EITC dollars claimed by filing status. The Tax Policy Center (TPC), however, projectsestimated that in 2015, 70% of all EITC dollars will be claimed by unmarried tax filers (head of household and single filing statuses), with most (60% of all EITC dollars) claimed by those filing as heads of household. (The TPC projections are likely similar to the actual amounts of the EITC claimed by filing status in 2013 and 2014, given that they are based on the same credit formula.) Figure 10 shows projectionsFigure 10 shows estimates for EITC dollars claimed by filing status for 2015.

    Figure 10. Estimate of EITC Dollars Claimed by Marital Status, 2015

    Dollars in Billions

    Source: Congressional Research Service, based on estimates from the Urban-Brookings Institution Tax Policy Center Table T13-0274, available at http://www.taxpolicycenter.org/numbers/index.cfm. Estimates are for tax year 2015.

    Region

    For tax year 20142015, the EITC was claimed on 19.118.7% of all tax returns. However, the rate at which the EITC is claimed by tax filers varies considerably by state. In 20142015, the state with the highest percentage of returns claiming the EITC was Mississippi, with the credit claimed on 32.131.6% of all returns. In contrast, the EITC was claimed on 11.95% of all returns in New Hampshire that year.

    Figure 11 provides a map showing the percentage of all tax returns claiming the EITC by state. In addition to considerable state variation, the map shows that there is a regional pattern to EITC receipt. A greater share of returns filed in certain southern states claimed the EITC than returns in other regions of the country. The EITC was claimed on the smallest percentage of returns in New England as well as some states in the northern Midwest.

    Figure 11. Percentage of Tax Returns Claiming the EITC by State for 2014

    2015

    Source: Congressional Research Service, based on data from the U.S. Internal Revenue Service.

    Notes: For detail on EITC returns by state, see Table A-3.

    Appendix. Additional Tables

    Table A-1. EITC Tax Filers and Dollars Claimed: 1975-2014

    2015

    68,525

    68,339

    2,440

     

     

    In millions of nominal dollars

    In millions of constant 20142015 dollars

    Year

    Tax Filers Claiming the EITC (Millions)

    Total EITC

    Refunded EITC

    Average EITC

    Total EITC

    Refunded EITC

    Average EITC

    1975

    6.215

    $1,250

    900

    $900

    201

    $201

    5,507

    5,500

    3,965

    3,960

    884

    886

    1976

    6.473

    1,295

    890

    200

    5,394

    5,388

    3,707

    3,703

    832

    833

    1977

    5.627

    1,127

    880

    200

    4,408

    4,403

    3,442

    3,438

    781

    782

    1978

    5.192

    1,048

    801

    202

    3,810

    3,805

    2,912

    2,908

    733

    734

    1979

    7.135

    2,052

    1,395

    288

    6,699

    6,691

    4,554

    4,549

    939

    940

    1980

    6.954

    1,986

    1,370

    286

    5,713

    5,706

    3,941

    3,936

    822

    823

    1981

    6.717

    1,912

    1,278

    285

    4,985

    4,980

    3,332

    3,328

    742

    743

    1982

    6.395

    1,775

    1,222

    278

    4,360

    4,354

    2,998

    3,001

    682

    683

    1983

    7.368

    1,795

    1,289

    244

    4,272

    4,266

    3,067

    3,064

    580

    581

    1984

    6.376

    1,638

    1,162

    257

    3,737

    3,732

    2,651

    2,648

    586

    586

    1985

    7.432

    2,088

    1,499

    281

    4,599

    4,594

    3,302

    3,298

    618

    619

    1986

    7.156

    2,009

    1,479

    281

    4,345

    4,339

    3,198

    3,195

    607

    608

    1987

    8.738

    3,391

    2,930

    388

    7,075

    7,067

    6,113

    6,106

    809

    810

    1988

    11.148

    5,896

    4,257

    529

    11,813

    11,799

    8,529

    8,519

    1,060

    1,059

    1989

    11.696

    6,595

    4,636

    564

    12,606

    12,591

    8,861

    8,851

    1,078

    1,077

    1990

    12.542

    7,542

    5,266

    601

    13,677

    13,661

    9,550

    9,538

    1,090

    1,089

    1991

    13.665

    11,105

    8,183

    813

    19,325

    19,302

    14,240

    14,223

    1,415

    1,413

    1992

    14.097

    13,028

    9,959

    924

    21,983

    22,009

    16,824

    16,804

    1,561

    1,559

    1993

    15.117

    15,537

    12,028

    1,028

    25,485

    25,454

    19,729

    19,706

    1,686

    1,684

    1994

    19.017

    21,105

    16,598

    1,110

    33,753

    33,713

    26,545

    26,514

    1,775

    1,773

    1995

    19.334

    25,956

    20,829

    1,343

    40,368

    40,320

    32,394

    32,355

    2,089

    2,086

    1996

    19.464

    28,825

    23,157

    1,481

    43,544

    43,492

    34,982

    34,940

    2,237

    2,235

    1997

    19.391

    30,389

    24,396

    1,567

    44,877

    44,823

    35,984

    36,027

    2,314

    2,311

    1998

    20.273

    32,340

    27,175

    1,595

    46,970

    47,025

    39,515

    39,468

    2,319

    2,317

    1999

    19.259

    31,901

    27,604

    1,656

    45,385

    45,331

    39,271

    39,225

    2,356

    2,353

    2000

    19.277

    32,296

    27,803

    1,675

    44,452

    44,400

    38,268

    38,223

    2,305

    2,303

    2001

    19.593

    35,784

    29,043

    1,826

    47,891

    47,834

    38,869

    38,823

    2,444

    2,441

    2002

    21.574

    37,786

    33,258

    1,751

    49,783

    49,724

    43,817

    43,765

    2,307

    2,304

    2003

    22.112

    39,186

    34,508

    1,772

    50,477

    50,417

    44,451

    44,398

    2,283

    2,280

    2004

    22.270

    40,024

    35,299

    1,797

    50,219

    50,159

    44,290

    44,238

    2,255

    2,252

    2005

    22.752

    42,410

    37,465

    1,864

    51,469

    51,408

    45,468

    45,414

    2,262

    2,259

    2006

    23.042

    44,388

    39,072

    1,926

    52,186

    52,124

    45,936

    45,882

    2,264

    2,262

    2007

    24.584

    48,540

    42,508

    1,974

    55,487

    55,421

    48,592

    48,534

    2,257

    2,254

    2008

    24.756

    50,669

    44,260

    2,047

    55,779

    55,713

    48,724

    48,666

    2,253

    2,251

    2009

    27.041

    59,240

    53,985

    2,191

    65,447

    65,370

    59,642

    59,571

    2,421

    2,418

    2010

    27.368

    59,562

    54,256

    2,176

    64,741

    64,664

    58,974

    58,904

    2,365

    2,362

    2011

    27.912

    62,906

    55,350

    2,254

    66,284

    66,205

    58,322

    58,253

    2,375

    2,372

    2012

    27.848

    64,129

    56,190

    2,303

    66,202

    66,124

    57,938

    58,007

    2,377

    2,375

    2013

    28.822

    68,084

    59,145

    2,362

    69,271

    69,189

    60,175

    60,104

    2,403

    2,400

    2014

    28.538

    68,339

    58,889

    2,395

    68,420

    58,959

    2,398

    2015

    28.082

    58,889

    795

    2,395

    440

    68,525

    58,795

    Source: Congressional Research Service. For pre-2003 data, U.S. Congress, House Committee on Ways and Means, 2004 Green Book, Background Material and Data on Programs Within the Jurisdiction of the Committee on Ways and Means, 108th Congress, 2nd session, WMCP 108-6, March 2004, pp. 13-41. For 2003 and later data, Internal Revenue Service, Total File, United States, Individual Income and Tax Data, by State and Size of Adjusted Gross Income, 2003 through 2014, expanded unpublished version, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Note: Constant 20142015 dollars were computed using the Consumer Price Index for all Urban Consumers (CPI-U).

    Table A-2. Average EITC, Number of Returns with EITC Claimed, and Total EITC Benefits for 20142015, by Adjusted Gross Income

    AGI

    Totals

    No Qualifying Children

    One Qualifying Child

    Two Qualifying Children

    Three or More Qualifying Children

    Average Credit

     

     

     

     

     

    Less than $5,000

    $540

    536

    $215

    214

    $1,162

    1259

    $1,562

    1516

    $1,810

    1842

    $5,000 to $9,999

    1,558

    1537

    427

    438

    2,787

    2776

    3,072

    3095

    3,503

    3463

    $10,000 to $14,999

    2,660

    2655

    202

    219

    3,254

    3305

    5,028

    5086

    5,648

    5719

    $15,000 to $19,999

    4,048

    4175

    183

    207

    3,199

    3269

    5,315

    5430

    5,985

    6090

    $20,000 to $24,999

    3,753

    3867

    0

    15

    2,644

    2728

    4,687

    4810

    5,501

    5558

    $25,000 to $29,999

    2,943

    3036

    0

    1,934

    2005

    3,731

    3876

    4,551

    4727

    $30,000 to $34,999

    2,088

    2208

    0

    1,157

    1248

    2,728

    2876

    3,549

    3783

    $35,000 to $39,999

    1,446

    1509

    0

    565

    614

    1,821

    1895

    2,611

    2785

    $40,000 to $44,999

    1,047

    1138

    0

    323

    402

    925

    1067

    1,694

    1797

    $45,000 and higher

    584

    689

    0

    0

    418

    505

    717

    816

    Totals

    2,395

    2440

    287

    294

    2,381

    2411

    3,754

    3830

    4,107

    4185

    Total Returns with EITC

     

     

     

     

     

    Less than $5,000

    2,678,792

    601,793

    1,901,415

    889,859

    491,682

    436,819

    201,590

    374

    84,107

    73,740

    $5,000 to $9,999

    4,980,767

    657,247

    2,708,132

    579,641

    1,600,850

    451,448

    487,921

    462,199

    183,865

    163,958

    $10,000 to $14,999

    6,293,185

    249,889

    2,452,653

    469,718

    1,915,924

    950,933

    1,391,897

    352,646

    532,710

    476,591

    $15,000 to $19,999

    3,871,549

    803,504

    321,082

    315,055

    1,712,112

    622,541

    1,291,965

    293,599

    546,390

    572,309

    $20,000 to $24,999

    3,008,698

    2,871,259

    0

    11,992

    1,553,646

    437,242

    1,000,063

    965,174

    453,989

    456,851

    $25,000 to $29,999

    2,454,246

    474,924

    0

    1,253,596

    288,353

    811,158

    795,726

    389,492

    390,844

    $30,000 to $34,999

    2,203,407

    126,651

    0

    1,078,788

    073,220

    777,014

    694,718

    347,605

    358,713

    $35,000 to $39,999

    1,609,000

    827,385

    0

    692,988

    794,708

    577,388

    680,147

    338,624

    352,531

    $40,000 to $44,999

    945,503

    933,831

    0

    191,427

    206,319

    454,086

    449,258

    299,990

    278,254

    $45,000 and higher

    492,762

    535,225

    0

    0

    220,167

    218,935

    272,595

    316,290

    Totals

    28,537,909

    081,708

    7,384,282

    266,266

    10,491,013

    261,585

    7,213,249

    113,774

    3,449,367

    440,083

    Total EITC Claimed ($ in Thousands)

     

     

     

     

    Less than $5,000

    $1,394,768

    1,447,759

    409,156

    $403,902

    571,509

    $549,739

    314,839

    $305,264

    152,256

    $135,860

    $5,000 to $9,999

    7,760,435

    156,186

    1,156,586

    128,837

    4,460,893

    029,193

    1,498,859

    430,309

    644,096

    567,847

    $10,000 to $14,999

    16,736,984

    592,719

    496,528

    539,916

    6,233,653

    447,781

    6,997,885

    879,588

    3,008,917

    2,725,435

    $15,000 to $19,999

    15,672,521

    879,928

    58,671

    65,363

    5,477,335

    304,565

    6,866,382

    7,024,466

    3,270,132

    485,534

    $20,000 to $24,999

    11,291,513

    102,536

    1

    177

    4,107,069

    3,920,324

    4,687,078

    642,962

    2,497,366

    539,073

    $25,000 to $29,999

    7,223,624

    514,991

    0

    2,424,338

    583,186

    3,026,636

    084,268

    1,772,650

    847,536

    $30,000 to $34,999

    4,601,608

    694,628

    0

    1,248,334

    339,567

    2,119,707

    1,998,221

    1,233,567

    356,841

    $35,000 to $39,999

    2,327,289

    758,143

    0

    391,534

    487,696

    1,051,649

    288,627

    884,106

    981,821

    $40,000 to $44,999

    989,895

    1,062,476

    0

    61,764

    82,985

    420,006

    479,451

    508,126

    500,040

    $45,000 and higher

    287,554

    368,600

    0

    0

    91,987

    110,581

    195,567

    258,020

    Totals

    68,339,182

    524,975

    2,120,942

    138,197

    24,976,429

    745,035

    27,075,028

    243,735

    14,166,783

    398,008

    Source: Congressional Research Service, based on data from the U.S. Department of the Treasury, Internal Revenue Services, SOI Tax Stats - Individual Income Tax Returns Publication 1304, Internal Revenue Service, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Table A-3. Total EITC Returns and Amounts for 20142015, by State

    State or Area

    Total Returns

    Returns with EITC Claimed

    Percentage of Total Returns with EITC Claimed

    Total EITC Claimed (In thousands $ (In $1,000s)

    Average EITC

    Percent of EITC Refunded

    United States total

    147,766,770

    149,726,990

    28,233,280

    27,995,920

    19.118.7%

    $67,720,175

    68,061,561

    $2,399

    431

    86.40%

    Alabama

    2,046,560

    053,780

    529,020

    521,470

    25.8

    4%

    1,444,910

    699

    2,731

    770

    89.0

    88.6%

    Alaska

    361,130

    362,250

    48,620

    47,960

    13.5

    2%

    98,599

    99,054

    2,028

    065

    88.9

    5%

    Arkansas

    Arizona

    1,223,140

    2,904,950

    310,300

    608,240

    25.4

    20.9%

    794,507

    1,557,532

    2,560

    561

    88.4

    87.1%

    Arizona

    Arkansas

    2,845,710

    1,229,100

    603,080

    308,760

    21.2

    25.1%

    1,522,532

    806,570

    2,525

    612

    87.6

    88.1%

    California

    17,411,400

    759,720

    3,312,640

    263,270

    19.0

    18.4%

    7,748,313

    655,742

    2,339

    346

    83.2

    0%

    Colorado

    2,553617,250

    377,440

    376,800

    14.8

    4%

    810,024

    814,851

    2,146

    163

    86.1

    85.4%

    Connecticut

    1,749,470

    761,060

    231,640

    080

    13.2

    1%

    497,420

    501,490

    2,147

    170

    86.5

    2%

    Delaware

    443,820

    452,740

    77,250

    080

    17.4

    0%

    178,189

    181,160

    2,307

    350

    90.3

    89.8%

    District of Columbia

    336,950

    344,720

    56,590

    55,840

    16.8

    2%

    129,888

    127,184

    2,295

    278

    86.8

    87.6%

    Florida

    9,398,920

    627,280

    2,218,780

    217,830

    23.6

    0%

    5,404,377

    455,386

    2,436

    460

    84.7

    83.9%

    Georgia

    4,378,120

    442,630

    1,138,570

    132,700

    26.0

    25.5%

    3,063,653

    097,961

    2,691

    735

    86.4

    1%

    Hawaii

    681,840

    688,570

    114,020

    110,700

    16.7

    1%

    246,619

    239,484

    2,163

    89.0

    88.4%

    Idaho

    701,990

    721,890

    139,650

    138,500

    19.9

    2%

    317,425

    318,997

    2,273

    303

    87.2

    86.2%

    Illinois

    6,131,110

    161,970

    1,055,660

    039,170

    17.2

    16.9%

    2,582,429

    573,670

    2,446

    477

    85.6

    4%

    Indiana

    3,078,750

    104,540

    571,260

    563,530

    18.6

    2%

    1,348,571

    351,269

    2,361

    398

    88.6

    3%

    Iowa

    1,445,570

    454,290

    216,720

    214,700

    15.0

    14.8%

    476,999

    482,748

    2,201

    248

    88.4

    0%

    Kansas

    1,336,440

    339,150

    221,190

    217,330

    16.6

    2%

    511,361

    512,239

    2,312

    357

    89.3

    88.7%

    Kentucky

    1,891,820

    909,930

    418,880

    412,530

    22.1

    21.6%

    986,209

    989,797

    2,354

    399

    88.2

    87.7%

    Louisiana

    2,007,830

    1,994,080

    533,130

    531,070

    26.6

    %

    1,461,088

    485,851

    2,741

    798

    88.1

    87.9%

    Maine

    638,280

    645,700

    106,820

    105,390

    16.7

    3%

    217,211

    302

    2,033

    062

    85.4

    84.8%

    Maryland

    2,935,560

    963,630

    445,690

    438,130

    15.2

    14.8%

    1,017,496

    011,898

    2,283

    310

    84.9

    8%

    Massachusetts

    3,343,720

    397,100

    427,330

    421,560

    12.8

    4%

    873,980

    871,023

    2,045

    066

    87.3

    86.9%

    Michigan

    4,685,320

    717,510

    844,910

    827,230

    18.0

    17.5%

    2,031,147

    020,128

    2,404

    442

    86.3

    1%

    Minnesota

    2,687,780

    725,190

    357,410

    350,470

    13.3

    12.9%

    761,404

    760,353

    2,130

    170

    87.6

    2%

    Mississippi

    1,243,420

    244,720

    399,570

    393,610

    32.1

    31.6%

    1,128,094

    013

    2,823

    866

    88.8

    5%

    Missouri

    2,767,370

    787,760

    535,370

    527,020

    19.3

    18.9%

    1,266,203

    270,289

    2,365

    410

    88.6

    2%

    Montana

    492,010

    498,500

    83,200

    82,100

    16.9

    5%

    172,795

    174,131

    2,077

    121

    87.3

    86.7%

    Nebraska

    889,100

    899,330

    139,700

    138,330

    15.7

    4%

    319,361

    321,924

    2,286

    327

    88.6

    0%

    Nevada

    1,321,700

    350,730

    260,620

    264,090

    19.7

    6%

    622,817

    639,724

    2,390

    422

    87.4

    2%

    New Hampshire

    685,010

    693,090

    81,730

    79,710

    11.9

    5%

    157,544

    156,004

    1,928

    957

    85.5

    1%

    New Jersey

    4,342,620

    385,670

    633,940

    630,980

    14.6

    4%

    1,444,010

    453,381

    2,278

    303

    84.9

    5%

    New Mexico

    911,750

    917,450

    220,440

    320

    24.2

    0%

    529,254

    537,800

    2,401

    441

    89.8

    7%

    New York

    9,523,840

    614,610

    1,857,050

    830,650

    19.5

    0%

    4,273,027

    258,153

    2,301

    326

    83.9

    5%

    North Carolina

    4,380,810

    457,230

    974,660

    970,220

    22.2

    21.8%

    2,382,346

    396,002

    2,444

    470

    87.7

    2%

    North Dakota

    370,570

    369,370

    44,180

    360

    11.9

    12.0%

    91,023

    93,540

    2,060

    109

    88.3

    87.8%

    Ohio

    5,559,950

    592,150

    986,380

    975,220

    17.7

    4%

    2,339,276

    354,212

    2,372

    414

    88.3

    %

    Oklahoma

    1,639,860

    642,080

    348,000

    350,820

    21.2

    4%

    853,551

    877,455

    2,453

    501

    87.8

    4%

    Oregon

    1,826,550

    874,490

    297,650

    294,750

    16.3

    15.7%

    616,801

    661

    2,072

    092

    87.6

    3%

    Pennsylvania

    6,169,090

    200,560

    969,860

    961,610

    15.7

    5%

    2,134,260

    149,696

    2,201

    236

    88.7

    3%

    Rhode Island

    521,890

    527,510

    88,070

    86,640

    16.9

    4%

    197,398

    196,016

    2,241

    262

    87.8

    3%

    South Carolina

    2,124,300

    169,730

    513,350

    507,760

    24.2

    23.4%

    1,282,656

    289,787

    2,499

    540

    88.6

    3%

    South Dakota

    410,920

    415,380

    64,620

    63,560

    15.7

    3%

    140,406

    910

    2,173

    217

    89.5

    1%

    Tennessee

    2,928,360

    970,180

    674,840

    668,500

    23.0

    22.5%

    1,683,788

    690,333

    2,495

    529

    86.6

    4%

    Texas

    11,992,010

    12,151,810

    2,720,390

    732,930

    22.7

    5%

    7,188,558

    349,094

    2,642

    689

    85.3

    84.7%

    Utah

    1,221,670

    263,690

    204,370

    201,390

    16.7

    15.9%

    471,171

    469,097

    2,305

    329

    88.1

    87.3%

    Vermont

    322,860

    326,090

    46,420

    45,920

    14.4

    1%

    87,885

    88,414

    1,893

    925

    84.5

    1%

    Virginia

    3,871,680

    911,870

    641,360

    638,150

    16.6

    3%

    1,457,910

    472,705

    2,273

    308

    87.5

    86.9%

    Washington

    3,342,750

    432,600

    466,800

    462,860

    14.0

    13.5%

    994,273

    995,541

    2,130

    151

    88.0

    87.6%

    West Virginia

    782780,960

    161,330

    159,640

    20.6

    4%

    357,972

    364,329

    2,219

    282

    90.6

    4%

    Wisconsin

    2,811,290

    840,650

    401,440

    393,450

    14.3

    13.9%

    873,359

    417

    2,176

    220

    88.5

    2%

    Wyoming

    279,930

    278,610

    37,520

    38,090

    13.4

    7%

    77,435

    80,353

    2,064

    110

    89.0

    88.2%

    Other Areas

    718,040

    751,180

    23,850

    21,900

    3.3

    2.9%

    52,651

    48,192

    2,208

    201

    96.2

    95.9%

    Source: Congressional Research Service, based on data from the U.S. Department of the Treasury, Internal Revenue Service (IRS), Individual Income and Tax Data, by State andInternal Revenue Service, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.

    Note: Totals in this table differ slightly from total shown in Table A-2. While the figures in Table A-2 and Table A-3 are both based on data from the IRS, the data in Table A-3 include "substitutes for returns" in which the IRS constructs tax returns for certain nonfilers.

    Author Contact Information

    [author name scrubbed], Specialist in Social Policy ([email address scrubbed], [phone number scrubbed])
    [author name scrubbed], Specialist in Public Finance ([email address scrubbed], [phone number scrubbed])

    Acknowledgments

    The authors would like to thank Jeffrey StupakClarissa Gregory, Research Assistant in the Government Finance and TaxationDomestic Social Policy Section, for hisher assistance in updating this report and CRS graphics specialist Jamie Hutchinson for creating the original figures in this report.

    Footnotes

    A tax filer who is claimed as a dependent on another person's tax return is ineligible for the EITC.

    The tables can be found, for 2017 returns, beginning on page 62 of the Form 1040 general instructions, at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.

    1.

    The original title of the law, the Tax Cuts and Jobs Act, was stricken before final passage because it violated what is known as the Byrd rule, a procedural rule that can be raised in the Senate when bills, like the tax bill, are considered under the process of reconciliation. The actual title of the law is "To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018." For more information on the Byrd rule, see CRS Report RL30862, The Budget Reconciliation Process: The Senate's "Byrd Rule", by [author name scrubbed]

    2.

    For more information on the changes made to the tax code by P.L. 115-97, see CRS Report R45092, The 2017 Tax Revision (P.L. 115-97): Comparison to 2017 Tax Law, coordinated by [author name scrubbed] and [author name scrubbed].

    3.

    For more information, see Michael Ng and David Wessel, Up Front | The Hutchins Center Explains: The Chained CPI, The Brookings Institution, December 7, 2017, https://www.brookings.edu/blog/up-front/2017/12/07/the-hutchins-center-explains-the-chained-cpi/.

    4.
    25.

    There is an additional filing status that may claim the EITC—"qualifying widow(er) with dependent child." Generally, tax filers may file their tax return as married filing jointly in the year their spouse died. A tax filer may be eligible to use qualifying widow(er) with dependent child as his or her filing status for two years following the year his or her spouse died. This filing status entitles the tax filer to use joint return tax rates and the highest standard deduction amount (if he or she does not itemize deductions). It does not entitle the tax filer to file a joint return. The tax filer calculates the EITC using the formula for other unmarried tax filing statuses (head of household and single). The eligibility rules for this filing status can be found on page 10 of IRS Publication 501, available at http://www.irs.gov/pub/irs-pdf/p501.pdf.

    36.

    The 20162017 version of this form can be found at https://www.irs.gov/pub/irs-pdf/f1040sei.pdf.

    47.

    For more information, see https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/special-eitc-rules.

    58.

    See Internal Revenue Code (IRC) §32(c)(1)(C) and http://www.irs.gov/Individuals/EITC,-Earned-Income-Tax-Credit,-Questions-and-Answers.

    6.

    For more information on Social Security numbers valid for work purposes, see SSA, Social Security Number for Noncitizens, at https://www.socialsecurity.gov/pubs/EN-05-10096.pdf; CRS Report R43840, Federal Income Taxes and Noncitizens: Frequently Asked Questions, by [author name scrubbed] and [author name scrubbed]; CRS Report R44290, Legal Authority for Aliens to Claim Refundable Tax Credits: In Brief, by [author name scrubbed].

    7.

    Nonresident aliens may be eligible to claim the credit if they are married to a U.S. citizen or resident alien, make the election to be treated as a resident alien, and file a joint return. For more information on the tax treatment of nonresident aliens, see CRS Report RS21732, Federal Taxation of Aliens Working in the United States, by [author name scrubbed]; CRS Report R43840, Federal Income Taxes and Noncitizens: Frequently Asked Questions, by [author name scrubbed] and [author name scrubbed].

    89.

    If an individual is the qualifying child for the purposes of the EITC of another person, that individual cannot themselves claim the EITC. For more information, see http://www.irs.gov/Individuals/EITC,-Earned-Income-Tax-Credit,-Questions-and-Answers.

    910.

    If placed by an authorized agency or court order.

    1011.

    Qualifying children who reside with a servicemember who is stationed outside the United States while serving on extended active duty with the U.S. Armed Forces are considered to reside in the United States for the purposes of the EITC.

    1112.

    Currently, there is no Federalfederal regulation which states that taxpayers with a qualifying child who do not claim that qualifying child for the EITC are ineligible for the credit. However, the website of the Internal Revenue Service does state that such individuals are ineligible for the childless EITC. For more information, see https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/qualifying-child-of-more-than-one-person.

    1213.

    The tie-breaker rules are: (1) if both tax filers are parents of the child, the parent with whom the child resided the longest during the year claims the child for the EITC; (2) if the child resided with each parent for the same amount of time during the year, the parent with the highest adjusted gross income (AGI) claims the child for the EITC; (3) if only one tax filer is the parent of the child, the tax filer who is the parent claims the child for the EITC; and (4) if neither tax filer is the parent of the child, the tax filer with the highest AGI claims the child for the EITC.

    1314.

    See IRC §32(k).

    14.

    The tables can be found, for 201615.

    For more information on Social Security numbers valid for work purposes, see SSA, Social Security Number for Noncitizens, at https://www.socialsecurity.gov/pubs/EN-05-10096.pdf; CRS Report R43840, Federal Income Taxes and Noncitizens: Frequently Asked Questions, by [author name scrubbed] and [author name scrubbed]; CRS Report R44290, Legal Authority for Aliens to Claim Refundable Tax Credits: In Brief, by [author name scrubbed].

    16.

    See IRC §32(m).

    17.

    Nonresident aliens may be eligible to claim the credit if they are married to a U.S. citizen or resident alien, make the election to be treated as a resident alien, and file a joint return. For more information on the tax treatment of nonresident aliens, see CRS Report RS21732, Federal Taxation of Aliens Working in the United States, by [author name scrubbed] (available upon request); CRS Report R43840, Federal Income Taxes and Noncitizens: Frequently Asked Questions, by [author name scrubbed] and [author name scrubbed].

    18.
    1519.

    Before 2011, any persons with a qualified child eligible for the EITC could elect to receive advance payment of the credit through the employer's payroll withholding system by filing an eligibility certificate (Form W-5) with his or her employer. The option was little used and eliminated by P.L. 111-226.

    1620.

    For more information, see IRS Statistics of Income, Table 2.5 at http://www.irs.gov/uac/SOI-Tax-Stats—Individual-Statistical-Tables-by-Size-of-Adjusted-Gross-Income.

    1721.

    These taxes include the regular income tax and alternative income tax, as well as self-employment taxes. Less common taxes, like unreported Social Security and Medicare taxes and certain taxes on IRAs, are also included. For an example of these taxes, see lines 57 through 62 on the 2016 IRS Form 1040, https://www.irs.gov/pub/irs-pdf/f1040.pdf.

    1822.

    The Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113) prevents a tax filer from claiming the EITC for any year in which the filer did not have a Social Security number (SSN) on or before the due date of the tax return for that year. This provision prevents a filer who obtains an SSN from retroactively claiming the EITC for any prior open tax years (generally three years) when the filer did not have an SSN at the time those years' returns were due.

    1923.

    This was effective beginning with returns filed in 2017. Section 201 of the Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113).

    2024.

    For more information on the nonrefundable (and refundable) portion of the child tax credit, see CRS Report R41873, The Child Tax Credit: Current Law and Legislative History, by [author name scrubbed].

    2125.

    In contrast, if the precontribution income places them in the plateau or the phase-in range, decreasing their earned income by making certain pretax savings contributions may either have no impact or result in a smaller credit.

    2226.

    The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) included a provision which made tax refunds, including those resulting from the EITC, disregarded in the administration of federal programs and federally assisted programs. At the end of 2012, this provision was made permanent by the American Taxpayer Relief Act of 2012 (P.L. 112-240).

    2327.

    U.S. Congress, Senate Committee on Finance, Tax Reduction Act of 1975, Report to Accompany H.R. 2166, 94th Cong., 1st sess., March 17, 1975, S. ReportRept. 94-36, p. 33.

    2428.

    The increase in the value of the credit in 2009 is likely due to the changes made by the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) which expanded the credit for families with three or more children and increased marriage penalty relief.