The Earned Income Tax Credit (EITC): How It
January 12, 2021November 14, 2023
Works and Who Receives It
Margot L. Crandall-Hollick
The Earned Income Tax Credit (EITC) is a refundable tax credit
The Earned Income Tax Credit (EITC) is a refundable tax credit
available to eligible
Acting Section Research
workers earning relatively low wagesthat boosts the income
Specialist in Public Finance
of eligible low-income workers, especially those with children. Because the credit is
. Because the credit is refundable, an EITC refundable, an EITC
Manager
recipient need not owe recipient need not owe
income taxes to receive the benefit. taxes to receive the benefit.
Eligibility
Gene Falk
Eligibility for and the amount of the for and the amount of the
EITC are based on a variety of factors, including EITC are based on a variety of factors, including
residence and taxpayer ID
Gene Falk
requirements, the presence of qualifying children, age requirements for those without
Specialist in Social Policy
qualifying children, and the recipient’s investment income and earned income.
Taxpayers with income above certain
Specialist in Social Policy
the amount of earned income and other sources of income, the presence and number of
qualifying children, age requirements for those without qualifying children, and
Conor F. Boyle
residency and taxpayer ID requirements. Taxpayers with income above certain
Analyst in Social Policy
thresholds are ineligible for the credit. These thresholds are ineligible for the credit. These
Conor F. Boyle
income thresholds vary based on marital income thresholds vary based on marital
status and number of qualifying children. status and number of qualifying children.
Analyst in Social Policy
The EITC depends on a recipient’s earned income.
The EITC depends on a recipient’s earned income.
Specifical ySpecifically, the EITC phases in as a , the EITC phases in as a
percentage of earned income (the “credit rate”) until the credit amount reaches its percentage of earned income (the “credit rate”) until the credit amount reaches its
maximum level. The EITC then remains at its maximum levelmaximum level. The EITC then remains at its maximum level
over a subsequent range over a subsequent range
of earned income, between the “earned income amount” and the “phaseout amount threshold.” of earned income, between the “earned income amount” and the “phaseout amount threshold.”
Final yFinally, the credit , the credit
gradual ygradually decreases to zero at a fixed rate (the “phaseout rate”) for each additional dollar of adjusted gross income decreases to zero at a fixed rate (the “phaseout rate”) for each additional dollar of adjusted gross income
(AGI) (or earned income, whichever is greater) above the phaseout amount threshold. The specific values of these (AGI) (or earned income, whichever is greater) above the phaseout amount threshold. The specific values of these
EITC parameters (e.g., credit rate, earned income amount) vary depending on several factors, including the EITC parameters (e.g., credit rate, earned income amount) vary depending on several factors, including the
number of qualifying children a taxpayer has and the taxpayer’s marital status, as number of qualifying children a taxpayer has and the taxpayer’s marital status, as
il ustratedillustrated in the figure and table in the figure and table
below. For below. For
20202023, the maximum EITC amounts are (1) $600 for a taxpayer without children in their household; (2) $3,995 for a taxpayer with one child; (3) $6,604 for a taxpayer with two children; and (4) $7,430 for a taxpayer with, the maximum EITC for a taxpayer without children is $538 per year. In contrast, the 2020
maximum EITC for a taxpayer with one child is $3,584 per year; for two children, $5,920 per year; and for three three
or more childrenor more children
, $6,660 per year. .
EITC Amount by Number of Qualifying Children, Marital Status, and Income, 20202023
Source: CRS calculations based on IRS Revenue Procedure 2022-38 and Internal Revenue Code §32.
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
EITC Parameters by Marital Status and Number of Qualifying Children, 20202023
Number of Qualifying Children
0
1
2
3 or more
unmarried taxpayers (single and head of household filers) (single and head of household filers)
credit rate
credit rate
7.65%
7.65%
34%
34%
40%
40%
45%
45%
earned income amount
earned income amount
$7,
$7,
030
$10,540
$14,800
$14,800
maximum 840
$11,750
$16,510
$16,510
maximum credit amount credit amount
$
$
538600
$3,
$3,
584
$5,920
$6,660995
$6,604
$7,430
phaseout amount threshold
phaseout amount threshold
$
$
8,790
$19,330
$19,330
$19,3309,800
$21,560
$21,560
$21,560
phaseout rate
phaseout rate
7.65%
7.65%
15.98%
15.98%
21.06%
21.06%
21.06%
21.06%
income where credit = 0
income where credit = 0
$
$
15,820
$41,756
$47,440
$50,95417,640
$46,560
$52,918
$56,838
married taxpayers (married(married
filing jointly) filing jointly)
credit rate
credit rate
7.65%
7.65%
34%
34%
40%
40%
45%
45%
earned income amount
earned income amount
$7,
$7,
030
$10,540
$14,800
$14,800
maximum 840
$11,750
$16,510
$16,510
maximum credit amount credit amount
$
$
538600
$3,
$3,
584
$5,920
$6,660995
$6,604
$7,430
phaseout amount threshold
phaseout amount threshold
$
$
14,680
$25,220
$25,220
$25,22016,370
$28,120
$28,120
$28,120
phaseout rate
phaseout rate
7.65%
7.65%
15.98%
15.98%
21.06%
21.06%
21.06%
21.06%
income where credit = 0
income where credit = 0
$
$
21,710
$47,646
$53,330
$56,84424,210
$53,120
$59,478
$63,398
Source: IRS Revenue Procedure IRS Revenue Procedure
2019-442022-38 and Internal Revenue Code §32. and Internal Revenue Code §32.
For more information, see Table 1.
The EITC is provided to individuals
The EITC is provided to individuals
and families once a year, in a lump-sum payment after individuals and and families once a year, in a lump-sum payment after individuals and
families file their federal income tax returns. Like families file their federal income tax returns. Like
al all tax credits, the EITC can reduce income tax liability. And tax credits, the EITC can reduce income tax liability. And
because the EITC is a refundable tax credit, if a taxpayer’s EITC is greater than what they owe in income taxes, because the EITC is a refundable tax credit, if a taxpayer’s EITC is greater than what they owe in income taxes,
they can receive the difference (the portion of the credit that remains after they can receive the difference (the portion of the credit that remains after
offset ingoffsetting any income tax liability) as a any income tax liability) as a
tax refund (or an increase in their tax refund, if they are already receiving a refund).tax refund (or an increase in their tax refund, if they are already receiving a refund).
The amount of the credit which exceeds their income tax liability is sometimes referred to as the refundable portion of the credit.
The amount of the credit a taxpayer receives is based on the prior year’s earned income and family composition.
The amount of the credit a taxpayer receives is based on the prior year’s earned income and family composition.
In other words, the In other words, the
2020 EITC—which2023 EITC is based on is based on
20202023 earned income (and other earned income (and other
20202023 factors) factors)
—wil , but will not be not be
paid until paid until
2021tax returns are filed in 2024. .
The EITC
The EITC
cannot beis not counted as income in determining eligibility counted as income in determining eligibility
for or the amount of any for or the amount of any
federal yfederally funded public funded public
benefit program. An EITC refund that is saved by a taxpayer does not count against the resource limits of any benefit program. An EITC refund that is saved by a taxpayer does not count against the resource limits of any
federal yfederally funded public benefit program for 12 months after the refund is received. funded public benefit program for 12 months after the refund is received.
For 2018 (i.e., 2018According to the most recent IRS data, for 2020 (i.e., 2020 income tax returns filed in tax returns filed in
2019), 26.5 mil ion2021), 26.0 million taxpayers ( taxpayers (
17% of al taxpayers) received a total of $64.9 bil ion 16% of all taxpayers filing an individual income tax return) received a total of $59 billion from the EITC, making the credit the largest need-tested antipoverty program that provides cash from the EITC, making the credit the largest need-tested antipoverty program that provides cash
benefits. In that year, benefits. In that year,
9796% of % of
al all EITC dollars were received by families with children. EITC dollars were received by families with children.
However, thereThere was was
considerable variation in EITC receipt by state, with a greater share filed in certain southern states compared to considerable variation in EITC receipt by state, with a greater share filed in certain southern states compared to
other regions of the country. other regions of the country.
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Contents
Introduction ..................................................................................................................................... 1
Eligibility for the EITC ................................................................................................................... 1
Filing a Federal Income Tax Return .......................................................................................... 2
Earned Income .......................................................................................................................... 2
Residency Requirements ........................................................................................................... 3
Qualifying Children .................................................................................................................. 3
Age Requirements for EITC Recipients with No Qualifying Children .................................... 4
Investment Income .................................................................................................................... 4
Disallowance of the EITC Due to Fraud or Reckless Disregard of Rules ................................ 4
Identification Requirements ...................................................................................................... 5
Calculating the EITC ....................................................................................................................... 5
EITC Eligibility by Poverty Status... 5
Income Limits for the EITC ......................................................................................... 8 EITC Eligibility by Earned Income at the Federal Minimum Wage ....................................... 10 8
Payment of the EITC ..................................................................................................................... 12 9
Interaction with Other Tax Provisions ..................................................................................... 13 10
Treatment of the EITC for Need-Tested Benefit Programs ..................................................... 1215
Data on EITC Receipt .................................................................................................................. 12. 15
Trends in EITC Receipt from 1975 to 20182020 ......................................................................... 12
... 15 EITC Receipt for 2018 2020 ......................................................................................................... 15... 19
By Number of Qualifying Children .................................................................................. 19 By Income Level ........ 15
By Income Level ................................................................................................ 18
By Filing and Marital Status ....... 21 By Marital Status ............................................................................................ 19
By Region .................. 23 By Region ....................................................................................................................... 20.. 24
Figures
Figure 1. Maximum EITC by Number of Qualifying Children, 2020 2023 ............................................. 6
Figure 2. EITC for an Unmarried Taxpayer with One Child by Income, 2020 2023 ............................... 7 Figure 3. EITC Parameters as a Percentage of Poverty by Marital Status and Number of
Qualifying Children, 2023 ............................................................................................................ 9
Figure 4. EITC Parameters as a Percentage of Full-Time Employment at the Federal
Minimum Wage by Marital Status and Number of Qualifying Children, 2023 .......................... 11
Figure 5. 7
Figure 3. Number of Tax Returns with the EITC, 1975-20182020 ..................................................... 13.. 17
Figure 46. Total EITC Dollars, 1975-2018 2020 ............................................................................... 14....... 18
Figure 57. Average EITC, 1975-2018 2020 ............................................................................................. 1519
Figure 68. Distribution of Total EITC Dollars by Number of Qualifying Children, 2018 2020 ............. 16. 20
Figure 79. Number of Tax Returns with the EITC by Number of Qualifying Children, 2018 2020 ........ 1721
Figure 810. Average EITC by Number of Qualifying Children, 2018 2020 ......................................... 17... 21
Figure 911. Number of Tax Returns with the EITC and Average EITC per Return by
Adjusted Gross Income (AGI), 2018 2020 ................................................................................ 19......... 23
Figure 1012. Distribution of Total EITC Dollars by Marital Status and Number of
Qualifying Children, 2017 .......................................................................................................... 24 20
Figure 1113. Percentage of Tax Returns with the EITC by State, 20182020 ...................................... 21
Tables
Table 1. EITC Parameters by Marital Status and Number of Qualifying Children, 2020 ............ 5...... 25
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27 link to page 3340 The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Tables
Table 2. Maximum AGI to Qualify for the EITC, by Number of Qualifying Children and
Filing Status, 2020........................................................................................................ 81. EITC Parameters by Marital Status and Number of Qualifying Children, 2023 .............. 5
Table A-1. EITC Receipt, 1975-2018 2020 ................................................................................ 22............ 26
Table A-2. Average EITC, Number of Tax Returns with the EITC, and Total EITC by
Qualifying Children and Adjusted Gross Income, 2018 2020 ..................................................... 23....... 28
Table A-3. EITC Receipt by State, 2018 2020 ................................................................................. 25...... 30
Table A-4. EITC Participation Rates by State, 2009-2016 2019 ........................................................... 26
. 32
Appendixes
Appendix. Additional Tables ......................................................................................................... 26 22
Contacts
Author Information ........................................................................................................................ 35 28
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Introduction
The Earned Income Tax Credit (EITC) is a refundable tax credit availableThe Earned Income Tax Credit (EITC) is a refundable tax credit available
to eligibleto eligible
workers with workers with
relatively low earnings. Because the credit is refundable, an EITC recipient need not relatively low earnings. Because the credit is refundable, an EITC recipient need not
ow eowe taxes to taxes to
receive the benefit. The credit is authorized by Section 32 of the Internal Revenue Code (IRC receive the benefit. The credit is authorized by Section 32 of the Internal Revenue Code (IRC
§32) and administered as part of the federal income tax system. According to IRS data, 26§32) and administered as part of the federal income tax system. According to IRS data, 26
.5 mil ion million taxpayers received a total of $taxpayers received a total of $
64.9 bil ion59 billion from the EITC for from the EITC for
20182020, making the credit the , making the credit the
largest need-tested antipoverty program that provides cash benefits. largest need-tested antipoverty program that provides cash benefits.
Under current law, the EITC is calculated based on a recipient’s earned income, using one of
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 eight different formulas, which vary depending on several factors, including the number of
qualifying children a taxpayer has (zero, one, two, or three or more) and their marital status qualifying children a taxpayer has (zero, one, two, or three or more) and their marital status
(unmarried or married). (unmarried or married).
Al All else being equal, the amount of the credit tends to increase with the else being equal, the amount of the credit tends to increase with the
number of eligiblenumber of eligible
children the EITC recipient has. Indeed, most of the EITC’s benefits—children the EITC recipient has. Indeed, most of the EITC’s benefits—
9796% of % of
EITC dollars for EITC dollars for
20182020—went to families with children.—went to families with children.
This report provides an overview of the EITC, first discussing eligibility
This report provides an overview of the EITC, first discussing eligibility
requirements for the requirements for the
credit, followed by how the credit is computed and paid. The report then provides data on 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. growth of the EITC since it was first enacted in 1975.
Final yFinally, the report concludes with , the report concludes with
the most recent IRS data on data on
the EITC from the EITC from
20182020 income tax returns, examining EITC receipt by number of qualifying income tax returns, examining EITC receipt by number of qualifying
children, income level, tax filing status, and location of residence.
Did the “Tax Cuts and Jobs Act (TCJA)” modify the EITC?
At the end of 2017, President Trump signed into law P.L. 115-97, commonly referred to as the Tax Cuts and Jobs Act or TCJA,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 wil increase more slowlychildren, income level, tax filing status, and location of residence. .
Eligibility for the EITC
A taxpayer must A taxpayer must
fulfil fulfill the following requirements to claim the EITC:
1. The taxpayer must file a federal income tax return. the following requirements to claim the EITC:
1. The taxpayer must file a federal income tax return.
1 T he original title of the law, the T ax 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. T he actual title of the law is “T o 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 Bill Heniff Jr.
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): Com parison to 2017 Tax Law, coordinated by Molly F. Sherlock and Donald J. Marples. 3 For more information, see Michael Ng and David Wessel, Up Front | The Hutchins Center Explains: The Chained
CPI, T he Brookings Institution, December 7, 2017, https://www.brookings.edu/blog/up-front/2017/12/07/the-hutchins-center-explains-the-chained-cpi/.
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2. The taxpayer must have earned income.
2. The taxpayer must have earned income.
3. The taxpayer must meet certain residency requirements.
3. The taxpayer must meet certain residency requirements.
4. The taxpayer’s children must meet relationship, residency, and age requirements
4. The taxpayer’s children must meet relationship, residency, and age requirements
to be considered qualifying children for the credit.
to be considered qualifying children for the credit.
5. Childless
5. Childless
workers who claim the credit must be between ages 25 and 64.workers who claim the credit must be between ages 25 and 64.
41 (This (This
age requirement
age requirement
does not apply to EITC claimants to EITC claimants
with qualifying children.) .)
6. The taxpayer’s investment income must be below a certain amount.
6. The taxpayer’s investment income must be below a certain amount.
7. The taxpayer must not be
7. The taxpayer must not be
disal oweddisallowed the credit due to prior fraud or reckless the credit due to prior fraud or reckless
disregard of the rules when they previously claimed the EITC.
disregard of the rules when they previously claimed the EITC.
8. The taxpayer must provide the Social Security number (SSN) for themselves,
8. The taxpayer must provide the Social Security number (SSN) for themselves,
their spouse, if married, and any children for whom the credit is claimed.
their spouse, if married, and any children for whom the credit is claimed.
5
Additional y, 2
Additionally, a taxpayer with income above a certain dollar amount (labeled as “income where a taxpayer with income above a certain dollar amount (labeled as “income where
credit = 0” icredit = 0” i
n Table 1) wil will be ineligiblebe ineligible
for the credit. Given that this income level is dependent
1 A taxpayer without qualifying children who can be claimed as a dependent on another person’s tax return is ineligible for the EITC. In addition, claimants without qualifying children must live in the United States for more than half the year.
2 The SSN must be issued to a citizen of the United States or pursuant to a provision of the Social Security Act relating to the lawful admission for employment in the United States. See IRC §§32(m).
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for the credit. Given that this income level is dependent on the number of qualifying children and marital status of the taxpayer, this requirement is on the number of qualifying children and marital status of the taxpayer, this requirement is
discussed in greater detail in the section of the report discussed in greater detail in the section of the report
entitled entitled “Calculating the EITC.”
Requirements (1) through (8) are discussed in detail below. Requirements (1) through (8) are discussed in detail below.
Filing a Federal Income Tax Return
A person must file a federal income tax return to be eligibleA person must file a federal income tax return to be eligible
for the EITC. Those who do not file a for the EITC. Those who do not file a
federal income tax return cannot receive the EITC. 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
The EITC can be claimed by taxpayers filing their tax return as married filing jointly, head of
household, or single.household, or single.
6 Taxpayers cannot3 In certain cases, taxpayers can claim the EITC if they use the filing status of married claim the EITC if they use the filing status of married
filing separately.filing separately.
4 If the taxpayer has a qualifying child, the taxpayer must include the If the taxpayer has a qualifying child, the taxpayer must include the
c hildchild’s ’s
name and Social Security number on a separate schedule (Schedule EIC) filed with the federal tax name and Social Security number on a separate schedule (Schedule EIC) filed with the federal tax
return.return.
75
Earned Income
A taxpayer must have earned income to claim the EITC. Earned income for the EITC is defined A taxpayer 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-as wages, tips, and other compensation included in gross income. It also includes net self-
4 A taxpayer without qualifying children who can be claimed as a dependent on another person’s tax return is ineligible for the EIT C. In addition, claimants without qualifying children must live in the United States for more th an half the year. 5 T he SSN must be issued to a citizen of the United States or pursuant to a provision of the Social Security Act relating to the lawful admission for employment in the United States. See IRC §§32(m). 6 T here is an additional filing status that may claim the EIT C—“qualifying widow(er) employment income (self-employment income after deduction of one-half of Social Security payroll taxes paid by a self-employed individual). In addition, according to the Internal Revenue Service, those who provide care for disabled individuals and receive certain nontaxable payments under a Medicaid waiver may treat those payments as earned income for the purposes of the EITC.6
In addition, servicemembers may elect to include combat pay in their earned 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 taxpayer may elect to include combat pay as earned income for the purpose of calculating the
3 There is an additional filing status that may claim the EITC—“qualifying widow(er) with dependent child.” with dependent child.”
Generally, taxpayers may file their tax return as married filing jointly in the year their spouse died.Generally, taxpayers may file their tax return as married filing jointly in the year their spouse died.
A taxpayer may be A taxpayer may be
eligibleeligible
to use qualifyingto use qualifying
widow(er)widow(er)
with dependent child as his or her filing status for two years followingwith dependent child as his or her filing status for two years following
the year his the year his
or her spouseor her spouse
died.died.
T his This filing status entitles the taxpayer to use joint return tax rates and the highest standard deduction filing status entitles the taxpayer to use joint return tax rates and the highest standard deduction
amount (if he or she doesamount (if he or she does
not itemize deductions). It does not entitle the taxpayer to file a joint return. not itemize deductions). It does not entitle the taxpayer to file a joint return.
T heThe taxpayer taxpayer
calculates the calculates the
EIT CEITC using using
the formula for other unmarried tax filing statuses (head of household and single). the formula for other unmarried tax filing statuses (head of household and single).
T heThe eligibilityeligibility
rules for this filing status can berules for this filing status can be
found on page 10 of IRSfound on page 10 of IRS
Publication 501, Publication 501,
ava ilableavailable at http://www.irs.gov/pub/irs-pdf/p501.pdf.
4 As a result of a permanent change to the law made by the American Rescue Plan Act (ARPA; P.L. 117-2), an individual who is married and files their tax return separately from their spouse can claim the EITC if the individual lives with a child for whom they can claim the EITC for more than half the year and either: (1) does not have the same principal place of abode as their spouse for the last six months of the year; or (2) has a decree, instrument, or agreement and does not live with their spouse at the end of the year.
5 The most recent version of this form can be found at https://www.irs.gov/forms-pubs/about-schedule-eic-form-1040. 6 These payments are provided to individual care providers for the care of eligible individuals under a state Medicaid Home and Community-Based Services waiver program described in §1915(c) of the Social Security Act and are not subject to federal taxation. See IRS Notice 2014-7; IRS, Certain Medicaid Waiver Payments May Be Excludable From Income, February 23, 2015, https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income; and Feigh v. Commissioner, No. 20163-17, 152 T.C. 267, May 15, 2019.
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EITC.7 Generally, servicemembers will make this election if it results in a larger credit. (Using at http://www.irs.gov/pub/irs-pdf/p501.pdf. 7 T he 2020 version of this form can be found at https://www.irs.gov/forms-pubs/about-schedule-eic-form-1040.
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
employment income (self-employment income after deduction of one-half of Social Security payroll taxes paid by a self-employed individual). In addition, according to the Internal Revenue Service, those who provide care for disabled individuals and receive certain nontaxable payments under a Medicaid waiver may treat those payments as earned income for the purposes of the
EITC.8
In addition, servicemembers may elect to include combat pay in their earned income when calculating the EITC. Al income earned by a member of the Armed Forces while in a designated combat zone is considered combat pay and is normal y not included in taxable income. However,
a taxpayer may elect to include combat pay as earned income for the purpose of calculating the EITC.9 General y, servicemembers wil 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.) combat pay to calculate the EITC does not make the combat pay taxable income.)
Certain forms of income are not considered earned income for the purpose of the EITC. These
Certain forms of income are not considered earned income for the purpose of the EITC. These
include pension and annuity income, income of nonresident aliens not from a U.S. business, 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 income earned while incarcerated for work in a prison, and TANF benefits paid in exchange for
participation in work experience or community service activities. participation in work experience or community service activities.
Final y, Finally, taxpayers who claim the foreign earned income exclusion (i.e., they file Form 2555 or taxpayers who claim the foreign earned income exclusion (i.e., they file Form 2555 or
Form 2555EZ with their federal income tax return) are ineligibleForm 2555EZ with their federal income tax return) are ineligible
to claim the EITC.to claim the EITC.
108
Residency Requirements
Under current law, an EITC recipient must be a resident of the United States, unless the recipient 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.resides in another country because of U.S. military service.
9
Qualifying Children
An EITC recipient’s qualifying child must meet three requirements.An EITC recipient’s qualifying child must meet three requirements.
1110 First, the child must have a First, the child must have a
specific specific
relationship to the taxpayer (son, daughter, step child or foster child, to the taxpayer (son, daughter, step child or foster child,
1211 brother, sister, brother, sister,
half-brother, half-sister, step brother, step sister, or descendent of such a relative). Second, the half-brother, half-sister, step brother, step sister, or descendent of such a relative). Second, the
child must share a child must share a
residence with the taxpayer for more than half the year in the United States. with the taxpayer for more than half the year in the United States.
13
8 T hese payments are provided to individual care providers for the care of eligible individuals under a state Medicaid Home and Community-Based Services waiver program described in §1915(c) of the Social Security Act and are not subject to federal taxation. See IRS Notice 2014 -7; IRS, Certain Medicaid Waiver Paym ents May Be Excludable From
Incom e, February 23, 2015, https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income; and Feigh v. Com m issioner, No. 20163-17, 152 T .C. 267, May 15, 2019.
912 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 taxpayer 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. In these cases, “tiebreaker” rules for who can claim the child for the EITC apply.13 If, as a result of
7 For more information, see https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/special-eitc- For more information, see https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/special-eitc-
rules. rules.
108 See See
Internal Revenue Code (IRC) §32(c)(1)(C) and http://www.irs.gov/Individuals/Internal Revenue Code (IRC) §32(c)(1)(C) and http://www.irs.gov/Individuals/
EIT CEITC,-Earned-Income-,-Earned-Income-
T axTax--
Credit,-Questions-and-Answers. Credit,-Questions-and-Answers.
11 If an individual is the qualifying child for the purposes of the EIT C of another person, that individual cannot themselves claim the EIT C. For more information, see http://www.irs.gov/Individuals/EIT C,-Earned-Income-T ax-Credit,-Questions-and-Answers.
12 If placed by an authorized agency or court order. 13 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 EIT C.
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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 total y disabled.
As a result of these three requirements, a child may be the qualifying child of more than one
taxpayer 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 al three of these individuals. But only one of these individuals can claim the qualifying child for the EITC, and the others cannot. In these cases, “tiebreaker” rules for who can claim the child for the EITC apply.14 If, as a result of these rules, a taxpayer cannot claim any qualifying children for the EITC, the taxpayer may be
able to claim the credit for those with no qualifying children.15
9 ARPA (P.L. 117-2) permanently provided the U.S. Treasury with the authority to make payments to Puerto Rico, American Samoa, and mirror-code territories for amounts those territories pay out in their own territorial EITCs. For Puerto Rico and American Samoa, such payments are contingent upon those territories increasing the amount of their EITC or enacting an EITC, respectively. The law also provided Puerto Rico with matching funds, up to $600 million per year, to provide a larger credit to its residents.
10 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.
11 If placed by an authorized agency or court order. 12 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.
13 See IRC §152(c)(4). Under tiebreaker rules, a child who can be claimed as an EITC qualifying child of more than one taxpayer is generally treated as the EITC qualifying child of (by order of application): (1) the parents, if they file a joint return and claim the child as a qualifying child; (2) the parent if only one of the persons is the child’s parent and the parent claims the child as a qualifying child; (3) the parent with whom the child lived for the longer period of time (continued...)
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these rules, a taxpayer cannot claim any qualifying children for the EITC, the taxpayer may be able to claim the credit for those with no qualifying children.14
Age Requirements for EITC Recipients with No Qualifying
Children
If a taxpayer has If a taxpayer has
no qualifying children, he or she must be between 25 and 64 years of age to be , he or she must be between 25 and 64 years of age to be
eligible eligible for the EITC. There is no age requirement for taxpayers for the EITC. There is no age requirement for taxpayers
with qualifying children.
Investment Income
A taxpayer with investment income over a certain dollar amount is ineligibleA taxpayer with investment income over a certain dollar amount is ineligible
for the EITC. For for the EITC. For
20202023, the limit on investment income is $, the limit on investment income is $
3,650.11,000.15 Investment income is defined as interest income Investment income is defined as interest income
(including tax-exempt interest), dividends, net rent, net capital gains, and net passive income. It (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.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 taxpayer is barred from claiming the EITC for a period of 10 years after the IRS makes a final A taxpayer is barred from claiming the EITC for a period of 10 years after the IRS makes a final
determination to reduce or determination to reduce or
disal owdisallow a taxpayer’s EITC because that individual made a fraudulent EITC claim. A taxpayer 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.16
during a taxpayer’s EITC because that individual made a fraudulent
14 Under tiebreaker rules, a child who can be claimed as an EIT C qualifying child of more than one taxpayer is generally treated as the EIT C qualifying child of (by order of application): (1) the parents, if they file a joint return and claim the child as a qualifying child; (2) the parent if only one of the persons is the child’s parent and the parent claims the child as a qualifying child; (3) the parent with whom the child lived for the longer period of time dur ing the tax year the tax year
if two of the persons are the child’s parent, they do not file a joint return together, and both parents claim the child; (4) if two of the persons are the child’s parent, they do not file a joint return together, and both parents claim the child; (4)
the parent with the highest AGI if the child lived with each parent for the same amount of time during the tax the parent with the highest AGI if the child lived with each parent for the same amount of time during the tax
ye aryear, they , they
do not file a joint return together, and both parents claim the child; (5) the person with the highest AGI if no parent can do not file a joint return together, and both parents claim the child; (5) the person with the highest AGI if no parent can
claim the child as a qualifyingclaim the child as a qualifying
child; or (6) the person with the highest AGIchild; or (6) the person with the highest AGI
if a parent may claim the child asif a parent may claim the child as
a qualifying a qualifying child butchild but
no parent claims the child as a qualifyingno parent claims the child as a qualifying
child, but only if that person has an AGIchild, but only if that person has an AGI
higher than any higher than any
parent who may claim the child as a qualifyingparent who may claim the child as a qualifying
child. For examples of application of the tiebreaker rules and answerschild. For examples of application of the tiebreaker rules and answers
to to
common questions, see Internal Revenue Service,common questions, see Internal Revenue Service,
Qualifying Child of More Than One Person, AGI and Tiebreaker
Rules, June 23, 2017, https://www.eitc.irs.gov/tax-preparer-toolkit/frequently-asked-questions/qualifying-child-of-, June 23, 2017, https://www.eitc.irs.gov/tax-preparer-toolkit/frequently-asked-questions/qualifying-child-of-
more-than-one-person-agi-and. more-than-one-person-agi-and.
1514 Currently, there is no federal regulation which states that taxpayers with a qualifying Currently, there is no federal regulation which states that taxpayers with a qualifying
child whochild who
do not claim that do not claim that
qualifyingqualifying
child for the child for the
EIT CEITC are ineligible are ineligible
for the credit. In the past, information provided on the IRS websitefor the credit. In the past, information provided on the IRS website
stated stated
that such individualsthat such individuals
were ineligible were ineligible for the childlessfor the childless
EIT C EITC. However, “the IRS has changed its position in proposed . However, “the IRS has changed its position in proposed
regulations.” For more information, see Joint Committee on Taxation, regulations.” For more information, see Joint Committee on Taxation,
Present Law and Background of Individual
Refundable Incom eIncome Tax Credits and a Description of Modifications to Refundable Credits Included in H.R. 6800, as
Passed by the House of Representatives, June 16, 2020, JCX-17-20, pp. 9-10. , June 16, 2020, JCX-17-20, pp. 9-10.
15 In 2020 and 2021, this threshold was $3,650. This amount was permanently increased by ARPA (P.L. 117-2) to $10,000 in 2021 and annually adjusted for inflation thereafter.
16 See IRC §32(k).
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EITC claim. A taxpayer 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.16
Identification Requirements
To be eligibleTo be eligible
for the credit, the taxpayer must providefor the credit, the taxpayer must provide
valid Social Security numbers (SSNs) for Social Security numbers (SSNs) for
work purposes for themselves, spouses if married filing jointly, and any qualifying children.17 The work purposes for themselves, spouses if married filing jointly, and any qualifying children.17 The
SSNs must be issued before the due date of the income tax return.18 (U.S. citizenship is not SSNs must be issued before the due date of the income tax return.18 (U.S. citizenship is not
required to be eligiblerequired to be eligible
for the credit. SSNs do not indicate U.S. citizenship.) Nonresident aliensfor 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 those who do not have green cards or do not spend sufficient time in the United States—are
general y ineligible generally ineligible for the EITC.19 for the EITC.19
Calculating the EITC
The EITC amount is based on formulas that consider earned income, number of qualifying 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 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 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 EITC then remains at its maximum level over a subsequent range of earned income, between the
“earned income amount” and the “phaseout amount threshold.” “earned income amount” and the “phaseout amount threshold.”
Final yFinally, the credit , the credit
gradual ygradually decreases in value to zero at a fixed rate (the “phaseout rate”) for each additional dollar of earned decreases in value to zero at a fixed rate (the “phaseout rate”) for each additional dollar of earned
income or AGI (whichever is greater) above the phaseout amount threshold. The specific values income or AGI (whichever is greater) above the phaseout amount threshold. The specific values
of these EITC parameters (e.g., credit rate, earned income amount, etc.) vary depending on of these EITC parameters (e.g., credit rate, earned income amount, etc.) vary depending on
several factors, including the number of qualifying children a taxpayer has and several factors, including the number of qualifying children a taxpayer has and
his or hertheir marital marital
status, as status, as
il ustratedillustrated i i
n Table 1.
Table 1. EITC Parameters by Marital Status
and Number of Qualifying Children, 20202023
Number of Qualifying Children
0
1
2
3 or more
unmarried taxpayers (single and head of household filers) (single and head of household filers)
credit rate
credit rate
7.65%
7.65%
34%
34%
40%
40%
45%
45%
earned income amount
earned income amount
$7,
$7,
030
$10,540
$14,800
$14,800
maximum 840
$11,750
$16,510
$16,510
maximum credit amount credit amount
$
$
538600
$3,
$3,
584
$5,920
$6,660995
$6,604
$7,430
phaseout amount threshold
phaseout amount threshold
$
$
8,790
$19,330
$19,330
$19,3309,800
$21,560
$21,560
$21,560
phaseout rate
phaseout rate
7.65%
7.65%
15.98%
15.98%
21.06%
21.06%
21.06%
21.06%
16 See IRC §32(k).
income where credit = 0
$17,640
$46,560
$52,918
$56,838
married taxpayers (married filing jointly)
credit rate
7.65%
34%
40%
45%
earned income amount
$7,840
$11,750
$16,510
$16,510
17 For more information on Social Security numbers17 For more information on Social Security numbers
valid for work purposes, see SSA,valid for work purposes, see SSA,
Social Security Number for
Noncitizens, at https://www.socialsecurity.gov/pubs/EN-05-10096.pdf; CRS, at https://www.socialsecurity.gov/pubs/EN-05-10096.pdf; CRS
Report R43840, Report R43840,
Federal Incom eIncome Taxes
and Noncitizens: Frequently Asked Questions, by Erika K. Lunder and, by Erika K. Lunder and
Margot L. Crandall-Hollick; archived CRS Margot L. Crandall-Hollick; archived CRS
Report R44290, Report R44290,
Legal Authority for Aliens to Claim Refundable Tax Credits: In Brief, by Erika K. Lunder. , by Erika K. Lunder.
18 See
18 See
IRC §32(m). IRC §32(m).
19 Nonresident aliens may be eligible19 Nonresident aliens may be eligible
to claim the credit if they are married to a U.S.to claim the credit if they are married to a U.S.
citizen or resident alien, make the 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 election to be treated as a resident alien, and file a joint return. For more information on the tax treatment of
nonresident aliens, see CRSnonresident aliens, see CRS
Report RS21732, Report RS21732,
Federal Taxation of Aliens Working in the United States, by Erika K. , by Erika K.
Lunder (available to congressional clients upon request); CRSLunder (available to congressional clients upon request); CRS
Report R43840, Report R43840,
Federal Incom eIncome Taxes and Noncitizens:
Frequently Asked Questions, by, by
Erika K. LunderErika K. Lunder
and Margot L. Crandall-Hollick. and Margot L. Crandall-Hollick.
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Number of Qualifying Children
0
1
2
3 or more
income where credit = 0
$15,820
$41,756
$47,440
$50,954
married taxpayers (married filing jointly)
credit rate
7.65%
34%
40%
45%
earned income amount
$7,030
$10,540
$14,800
$14,800
maximum maximum credit amount credit amount
$
$
538600
$3,
$3,
584
$5,920
$6,660995
$6,604
$7,430
phaseout amount threshold
phaseout amount threshold
$
$
14,680
$25,220
$25,220
$25,22016,370
$28,120
$28,120
$28,120
phaseout rate
phaseout rate
7.65%
7.65%
15.98%
15.98%
21.06%
21.06%
21.06%
21.06%
income where credit = 0
income where credit = 0
$
$
21,710
$47,646
$53,330
$56,84424,210
$53,120
$59,478
$63,398
Source: IRS Revenue Procedure IRS Revenue Procedure
2019-442022-38 and Internal Revenue Code and Internal Revenue Code
(IRC) §32. §32.
The EITC ranges from a maximum credit of $
The EITC ranges from a maximum credit of $
538600 for a taxpayer without a for a taxpayer without a
qualifying child to child to
$6,660$7,430 for a for a
taxpayer with three or more qualifying children, as taxpayer with three or more qualifying children, as
il ustratedillustrated i i
n Figure 1.
Figure 1. Maximum EITC by Number of Qualifying Children, 20202023
Source: CongressionalCongressional
Research Service,Research Service,
based on IRS Revenue Procedure based on IRS Revenue Procedure
2019-442022-38 and Internal Revenue Code and Internal Revenue Code
(IRC) §32. (IRC) §32.
The phaseout amount threshold varies by
The phaseout amount threshold varies by
both the number of qualifying children a taxpayer has the number of qualifying children a taxpayer has
and and
his or hertheir marital status. The phaseout amount threshold for those who are married filing joint marital status. The phaseout amount threshold for those who are married filing joint
returns is $returns is $
5,8906,560 greater than for unmarried greater than for unmarried
filing statuses w ithtaxpayers with the same number of children. the same number of children.
(TaxpayersFor those without qualifying children, the difference in the phaseout amount threshold among married versus unmarried taxpayers is $6,570. (Except in certain cases, taxpayers who file as married filing separately are ineligible who file as married filing separately are ineligible
for the EITC.) This higher phaseout for the EITC.) This higher phaseout
amount threshold for married taxpayers reduces (but amount threshold for married taxpayers reduces (but
general ygenerally does not eliminate) potential does not eliminate) potential
“marriage penalties” in the EITC whereby the credit for a married couple is less than the “marriage penalties” in the EITC whereby the credit for a married couple is less than the
combined credit of two unmarried recipients. combined credit of two unmarried recipients.
Figure 2 il ustratesillustrates the EITC amount by earned income level for an unmarried taxpayer with one the EITC amount by earned income level for an unmarried taxpayer with one
child for child for
20202023. It shows the three distinct ranges of EITC for this family: . It shows the three distinct ranges of EITC for this family:
• Phase-in Range: The EITC increases with earned income from the first dollar of The EITC increases with earned income from the first dollar of
earned income up to earned income of $
earned income up to earned income of $
10,54011,750. Over this earned income range, . Over this earned income range,
the credit equals the the credit equals the
credit rate (34% for a taxpayer with one child) times the (34% for a taxpayer with one child) times the
amount of annual earned income. The $amount of annual earned income. The $
10,54011,750 threshold is threshold is
cal edcalled the the
earned
income amount and is the level at which the EITC ceases to increase with earned and is the 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 earned income, is known as the phase-in range.
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income. The income interval up to the earned income amount, where the EITC increases with earned income, is known as the phase-in range.
• Plateau: The EITC remains at its maximum level of $3, The EITC remains at its maximum level of $3,
584995 from the earned from the earned
income amount ($
income amount ($
10,54011,750) until $) until $
19,33021,560. The $3,. The $3,
584995 credit represents the credit represents the
maximum credit for a taxpayer with one child in for a taxpayer with one child in
20202023. The income interval with . The income interval with
the EITC fixed at its maximum value represents the the EITC fixed at its maximum value represents the
plateau on Figure 2..
• Phaseout Range: Once adjusted gross income (or if greater, earned income) Once adjusted gross income (or if greater, earned income)
exceeds $
exceeds $
19,33021,560, the EITC is reduced for every additional dollar over that , the EITC is reduced for every additional dollar over that
amount. The $amount. The $
19,33021,560 threshold is known as the threshold is known as the
phaseout amount threshold for a for a
single taxpayer with one child in single taxpayer with one child in
20202023. For each dollar over the phaseout amount . For each dollar over the phaseout amount
threshold, the EITC is reduced by 15.98%. The 15.98% rate is known as the threshold, the EITC is reduced by 15.98%. The 15.98% rate is known as the
phaseout rate. The income interval from the phaseout income level until the . The income interval from the phaseout income level until the
EITC is completely phased out is known as the EITC is completely phased out is known as the
phaseout range. .
The EITC is completely phased out (EITC = $0) once the taxpayer’s AGI (or earned income,
The EITC is completely phased out (EITC = $0) once the taxpayer’s AGI (or earned income,
whichever is greater) reaches $whichever is greater) reaches $
41,75646,560. The earned income amounts and the phaseout amount . The earned income amounts and the phaseout amount
thresholds are adjusted each year for inflationthresholds are adjusted each year for inflation
, effectively adjusting the maximum credit amount annually for inflation. .
Figure 2. EITC for an Unmarried Taxpayer with One Child by Income, 20202023
Source: CongressionalCongressional
Research Service,Research Service,
based on information in IRS Revenuebased on information in IRS Revenue
Procedure Procedure
2019-442022-38 and Internal and Internal
Revenue Code §32. Revenue Code §32.
Notes: In this simplified In this simplified
example,example,
adjusted gross incomeadjusted gross income
(AGI) is assumed to equal earned income. (AGI) is assumed to equal earned income.
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link to page 10 link to page 10 link to page 13 link to page 13 link to page 13 link to page 13 link to page 14 link to page 14 The Earned EITC claimants use tables published by the IRS to calculate their credit amount based on their income, marital status, and number of qualifying children. The instructions for the federal income tax form show the EITC amounts in tables by income brackets (in $50 increments).20
20 The tables can be found, for 2022 returns beginning on page 46 of the Form 1040 general instructions, at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.
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EITC Eligibility by Poverty Status While the EITC is available to many families who are in poverty, it is also available for many families whose income places them above the federal poverty guidelines. EITC claimants use tables published by the IRS to calculate their credit amount based on their income, marital status, and number of qualifying children. The instructions for the federal income
tax form show the EITC amounts in tables by income brackets (in $50 increments).20
Income Limits for the EITC
As previously As previously
discussed, the EITC declines in valuediscussed, the amount of the EITC is reduced for each dollar of AGI (or earned income, if greater) above a certain dollar threshold, referred to as the phaseout amount threshold. above a certain dollar threshold, referred to as the phaseout amount threshold.
That threshold, combined with the phaseout rate, results in a specific income That threshold, combined with the phaseout rate, results in a specific income
level above which a taxpayer is ineligible for the credit level (referred to as (referred to as
“income where credit = 0” “income where credit = 0”
in Table 1)in Table 1) above which a taxpayer is ineligible for the credit. This
. This income level, where the credit reaches zero, is sometimes referred to as the income level, where the credit reaches zero, is sometimes referred to as the
eligibility threshold. .
As
As
il ustratedillustrated i i
n Table 1, there are eight eligibilitythere are eight eligibility
thresholds for the EITC thresholds for the EITC
depending on the
that depend on a taxpayer’s number of qualifying children number of qualifying children
a taxpayer has and his or herand marital status. The eligibility marital status. The eligibility
thresholds vary every year given that they are based in part on a parameter of the credit—the thresholds vary every year given that they are based in part on a parameter of the credit—the
phaseout amount threshold—that is adjusted for phaseout amount threshold—that is adjusted for
inflation. Table 2 shows the EITC eligibility thresholds for 2020. An EITC claimant’s AGI (or earned income, if higher)inflation.
Figure 3 illustrates the 2023 EITC parameters in Table 1 as a percentage of the 2023 federal poverty guidelines. An EITC claimant’s income must be below these must be below these
thresholds for the claimant to qualify for the EITC. thresholds for the claimant to qualify for the EITC.
In 2020, these thresholds range from $15,820
for an unmarried taxpayer with no qualifying children to $56,844 for a married taxpayer filing
jointly with three or more qualified children.
Table 2 expresses these eligibility thresholds as a percentage of the 2020 poverty guidelines. For
example, the poverty guideline for a family of three in 2020 was $21,720. Families of three with income at or below this amount are considered poor. The EITC eligibility threshold of $47,440 for an unmarried person filing jointly with two qualifying children was more than twice (218%)
the poverty guideline for a family of that type.
Table 2 also expresses these eligibility thresholds as a percentage of the earned income of one worker who works at the federal minimum wage ($7.25 per hour), 40 hours per week, 52 weeks a year ($15,080 annual y). For the purposes of the calculations in Table 2For example, the poverty guideline for a family of three in 2023 was $24,860. Families of three with income at or below this amount are considered poor. The EITC eligibility threshold of $52,918 for an unmarried person filing with two qualifying children was more than twice (213%) the poverty guideline for a family of that size.
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Figure 3. EITC Parameters as a Percentage of Poverty by Marital Status and
Number of Qualifying Children, 2023
Source: Congressional Research Service, based on IRS Revenue Procedure 2022-38, Internal Revenue Code (IRC) §32 and the 2023 Poverty Guidelines available at https://aspe.hhs.gov/poverty-guidelines. Notes: Poverty levels are based on the federal poverty guidelines for the lower 48 states.
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EITC Eligibility by Earned Income at the Federal Minimum Wage Figure 4 expresses these same eligibility thresholds as a percentage of the earned income of a worker who works at the federal minimum wage ($7.25 per hour), 40 hours per week, 52 weeks a year ($15,080 annually). For the purposes of the calculations in Figure 4, married EITC recipients married EITC recipients
are assumed to have are assumed to have
the sametwice the aggregate annual earned income as unmarried recipients—$ aggregate annual earned income as unmarried recipients—$
15,080. 30,160. In other words, both spouses are assumed to work full time.
The EITC is available
The EITC is available
in 2020 in 2023 to families with children who have earned income between to families with children who have earned income between
2.81.76 to to
3.83.77 times the annual earnings from a minimum wage job ( times the annual earnings from a minimum wage job (
277176% to 377% of $15,080 per worker). In contrast, if a married couple with no children has income that is more than 80% of the annual earnings of a household with two full-time workers making the federal minimum wage, they would be ineligible for the EITC. Of note, the majority of states (30) have minimum wages that are higher than the federal minimum wage. About 4 out of 10 returns which included the EITC are filed by residents of the 20 states with a minimum wage of $7.25 an hour.21
21 According to data from the U.S. Labor Department, the 15 states that have state minimum wages that equal the federal minimum wage of $7.25 an hour are Georgia, Iowa, Idaho, Indiana, Kansas, Kentucky, North Carolina, North Dakota, New Hampshire, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and Wyoming. Five states have no minimum wage: Alabama, Louisiana, Mississippi, South Carolina, and Tennessee. In these states, employers subject to the Fair Labor Standards Act must pay the current federal minimum wage of $7.25 per hour. For more information, see U.S. Department of Labor, State Minimum Wage laws, January 1, 2023, https://www.dol.gov/agencies/whd/minimum-wage/state. Based on data from the Internal Revenue Service for the 2020 tax year, there were a total of 110.4 million returns with the EITC filed by residents in these 20 states with $25.2 billion in total EITC claims (about 43% of all EITC dollars for 2020).
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Figure 4. EITC Parameters as a Percentage of Full-Time Employment at the Federal
Minimum Wage by Marital Status and Number of Qualifying Children, 2023
Source: Congressional Research Service, based on IRS Revenue Procedure 2022-38, Internal Revenue Code (IRC) §32 and the earned income per work earned income of one worker who works at the federal minimum wage ($7.25 per hour), 40 hours per week, 52 weeks a year ($15,080 annually). Notes: For the purposes of the calculations, the total household income of married EITC recipients ($30,160) is assumed to be double the income of unmarried recipients ($15,080).
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
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.22 Like all tax credits, the EITC can reduce income tax liability. % to 377% of $15,080).
Table 2. Maximum AGI to Qualify for the EITC, by Number of Qualifying Children
and Filing Status, 2020
Three or
One
Two
More
No Qualifying
Qualifying
Qualifying
Qualifying
Children
Child
Children
Children
Unmarried
$15,820
$41,756
$47,440
$50,594
Married Filing Jointly
$21,710
$47,646
$53,330
$56,844
As a percentage of the poverty threshold
Unmarried
124%
242%
218%
193%a
Married Filing Jointly
126%
219%
204%
185%b
20 T he tables can be found, for 2019 returns, beginning on page 46 of the Form 1040 general instructions, at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Three or
One
Two
More
No Qualifying
Qualifying
Qualifying
Qualifying
Children
Child
Children
Children
As a percentage of earned income at the federal minimum wage
40 hours per week, 52 weeks per year
Unmarried
105%
277%
315%
336%
Married Filing Jointly
144%
316%
354%
377%
Source: Congressional Research Service, based on IRS Revenue Procedure 2019-44, Internal Revenue Code (IRC) §32 and the 2020 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 annual y in a lump-sum payment after a taxpayer files a federal income tax return.21 Like al tax credits, the EITC can reduce income tax liability. And because the EITC is a refundable tax credit, if a taxpayer’s EITC is greater than And because the EITC is a refundable tax credit, if a taxpayer’s EITC is greater than
what they owe in income taxes, they can receive the difference (the portion of the credit that what they owe in income taxes, they can receive the difference (the portion of the credit that
remains after offsetting any income tax liability)remains after offsetting any income tax liability)
as a tax refund (or an increase in their tax as a tax refund (or an increase in their tax
refund, if they are already receiving a refund). refund, if they are already receiving a refund).
The amount of the credit that remains after offsetting any income tax liability
The amount of the credit that remains after offsetting any income tax liability
is often referred to is often referred to
as the as the
refundable portion of the EITC, whereas the amount that reduces income tax liability is of the EITC, whereas the amount that reduces income tax liability is
referred to as the referred to as the
nonrefundable portion of the credit. The refundable portion of the credit can of the credit. The refundable portion of the credit can
also offset other tax liabilitiesalso offset other tax liabilities
collected on the federal income tax return. These other taxes collected on the federal income tax return. These other taxes
include self-employment taxes and uncollected Social Security and Medicare taxes (e.g., Social include self-employment taxes and uncollected Social Security and Medicare taxes (e.g., Social
Security and Medicare taxes on unreported tip income).Security and Medicare taxes on unreported tip income).
22 General y23 Generally, only refundable credits, like , only refundable credits, like
the EITC, can offset other non-income tax liabilities. The amount of the refundable portion that the EITC, can offset other non-income tax liabilities. The amount of the refundable portion that
remains after offsetting other tax liabilitiesremains after offsetting other tax liabilities
is sometimes referred to as the “refunded” amount. A is sometimes referred to as the “refunded” amount. A
taxpayer who has no income tax liabilitytaxpayer who has no income tax liability
wil receive al will receive all of the EITC as the refundable portion of of the EITC as the refundable portion of
the credit. the credit.
Of the total aggregate amount of the EITC received
Of the total aggregate amount of the EITC received
in 2018—$64.9 bil ion—$0.6 bil ion for 2020—$59.2 billion:
• $0.7 billion offset offset
income tax liabilityincome tax liability
remaining after nonrefundable creditsremaining after nonrefundable credits
, $8.1 bil ion; • $6.8 billion offset other taxes collected offset other taxes collected
on the income tax returnon the income tax return
, and $56.2 bil ion was refunded. ; and • $51.7 billion exceeded income tax liability.
In other words, for In other words, for
2018, $64.3 bil ion
21 Before 2011, any persons with a qualified child eligible for the EIT C2020, $58.6 billion of the EITC ($6.8 billion plus $51.7 billion) was received as the refundable portion of the credit (and hence exceeded income taxes owed after reducing income tax liability by any nonrefundable tax credits).24
The EITC benefits families when they file their income taxes. Thus, payments are generally based on the prior year’s income, earned income, and family composition.25 That is, the 2023 EITC,
22 Before 2011, any persons with a qualified child eligible for the EITC could elect to receive advance payment of the could elect to receive advance payment of the
credit through the employer’s payroll withholding system by filing an eligibility certificate (Form Wcredit through the employer’s payroll withholding system by filing an eligibility certificate (Form W
-5) with his or her -5) with his or her
employer. employer.
T heThe option was little used option was little used
and eliminated by P.L. 111-226. and eliminated by P.L. 111-226.
2223 Other taxes Other taxes
also includes include uncollected Socialuncollected Social
Security and MedicareSecurity and Medicare
taxes duetaxes due
on compensation of an employee that on compensation of an employee that
was was treated as an independent contractor by an employer. treated as an independent contractor by an employer.
T hereThere are a variety of other taxes collected on the federal are a variety of other taxes collected on the federal
income tax return. Generally, these taxes are more likely to be paid by higherincome tax return. Generally, these taxes are more likely to be paid by higher
-income taxpayers who would-income taxpayers who would
not receive not receive
the EIT C. T heythe EITC. They include additional penalty taxes on individual retirement accounts (IRAs) and other qualified include additional penalty taxes on individual retirement accounts (IRAs) and other qualified
retirement accounts or other tax-favored accounts, household employment taxes, repayment of the firstretirement accounts or other tax-favored accounts, household employment taxes, repayment of the first
-time -time
homebuyer credit, and the 0.9% additional Medicarehomebuyer credit, and the 0.9% additional Medicare
tax on highertax on higher
-income taxpayers. Of note, the net -income taxpayers. Of note, the net
invest ment investment income tax (NIITincome tax (NIIT
) is ) is
considered an income tax.
24 This sum does not equal the total due to rounding. 25 Congress has sometimes allowed certain taxpayers to elect to use older earned income in computing their EITC (and the refundable portion of the child tax credit, known as the additional child tax credit or ACTC). In other words, if the most recent earned income results in a smaller credit than the previous year’s earned income, taxpayers may use that older earned income to calculate the EITC and ACTC. For a discussion, see “EITC/CTC Credit Computation Look-Back” in CRS Report R45864, Tax Policy and Disaster Recovery, by Brendan McDermott and Jennifer Teefy. Most recently, P.L. 116-260 included a provision allowing taxpayers to use 2019 earned income (as opposed to 2020 earned income) in calculating their 2020 EITC and ACTC.
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
based on a taxpayer’s earned income and family composition in 2023, will be paid in 2024.26considered an income tax.
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
of the EITC was received as the refundable portion of the credit (and hence exceeded income
taxes owed after reducing income tax liability by any nonrefundable tax credits).23
The EITC benefits families when they file their income taxes. Thus, payments are general y based
on the prior year’s income, earned income, and family composition.24 That is, the 2020 EITC, based on a taxpayer’s earned income and family composition in 2020, wil be paid in 2021.25 If If
the taxpayer is owed a refund, and that filer’s return includes an EITC, that refund the taxpayer is owed a refund, and that filer’s return includes an EITC, that refund
wil will be made be made
on or after February 15.on or after February 15.
2627
Interaction with Other Tax Provisions
On the tax form, the EITC can be found in the payments section after the lines for (1) income tax On the tax form, the EITC can be found in the payments section after the lines for (1) income tax
liabilityliability
net of any nonrefundable credits, (2) other non-income tax payments and (3) the lines for net of any nonrefundable credits, (2) other non-income tax payments and (3) the lines for
withholding and estimated tax payments. Nonrefundable tax credits, which are taken against withholding and estimated tax payments. Nonrefundable tax credits, which are taken against
(reduce) income tax liability, include the Lifetime Learning credit,(reduce) income tax liability, include the Lifetime Learning credit,
2728 the child and dependent care the child and dependent care
credit,credit,
2829 a savings credit, a savings credit,
2930 and the nonrefundable portions of both the child and the nonrefundable portions of both the child
credit30credit31 and the and the
American Opportunity tax credit (AOTC).American Opportunity tax credit (AOTC).
3132 If an EITC-eligible family has any income tax If an EITC-eligible family has any income tax
liabilityliability
and receives one or more of these credits, the total amount of their EITC and receives one or more of these credits, the total amount of their EITC
wil will remain remain
unchanged, but the amount they receive as the unchanged, but the amount they receive as the
refundable portion of the credit (i.e., the amount of the credit (i.e., the amount
which exceeds income tax liability) which exceeds income tax liability)
wil will change. change.
Specifical ySpecifically, if nonrefundable tax credits can , if nonrefundable tax credits can
reduce a family’s tax liability,reduce a family’s tax liability,
a greater amount of their EITC a greater amount of their EITC
wil will be received as the refundable be received as the refundable
portion, and less portion, and less
wil will offset their income tax liability.
26 The Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113) prevents a taxpayer 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.
27 This was effective beginning with returns filed in 2017 (i.e., 2016 income tax returns). §201 of the Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113).
28 CRS Report R41967, Higher Education Tax Benefits: Brief Overview and Budgetary Effects, by Margot L. Crandall-Hollick.
29 See CRS Report R44993, Child and Dependent Care Tax Benefits: How They Work and Who Receives Them, by Margot L. Crandall-Hollick.
30 See CRS In Focus IF11159, The Retirement Savings Contribution Credit, by Molly F. Sherlock.. 31 For more information on the nonrefundable (and refundable) portion of the child tax credit, see CRS Report R41873, The Child Tax Credit: How It Works and Who Receives It, by Margot L. Crandall-Hollick.
32 See CRS Report R42561, The American Opportunity Tax Credit: Overview, Analysis, and Policy Options, by Margot L. Crandall-Hollick.
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link to page 37 link to page 12 link to page 12 The Earned Income Tax Credit (EITC): How It Works and Who Receives It
EITC Participation Rates
According to the IRS, 79% of eligible EITC recipients received the credit for 2019 (i.e., on their 2019 income tax return), with substantial variation by number of qualifying children.33 Older data from offset their income tax liability.
23 T his total included $8.1 billion that offset other taxes plus $56.2 billion that was refunded. 24 Congress has sometimes allowed certain taxpayers to elect to use older earned income in computing their EIT C (and the refundable portion of the child tax credit, known as the additional child tax credit or ACT C). In other words, if the most recent earned income results in a smaller credit than the previous year’s earned income, taxpayers may use that older earned income to calculate the EIT C and ACT C. For a discussion, see “EIT C/CT C Credit Computation Look -Back” in CRS Report R45864, Tax Policy and Disaster Recovery, by Molly F. Sherlock and Jennifer T eefy. Most recently, P.L. 116-260 included a provision allowing taxpayers to use 2019 earned income (as opposed to 2020 earned income) in calculating their 2020 EIT C and ACT C.
25 T he Protecting Americans from T ax Hikes (PAT H) Act (Division Q of P.L. 114-113) prevents a taxpayer from claiming the EIT C 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. T his provision prevents a filer who obtains an SSN from retroactively claiming the EIT C 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. 26 T his was effective beginning with returns filed in 2017 (i.e., 2016 income tax returns). §201 of the Protecting Americans from T ax Hikes (PAT H) Act (Division Q of P.L. 114-113).
27 CRS Report R41967, Higher Education Tax Benefits: Brief Overview and Budgetary Effects, by Margot L. Crandall-Hollick. 28 See CRS Report R44993, Child and Dependent Care Tax Benefits: How They Work and Who Receives Them , by Margot L. Crandall-Hollick.
29 See CRS In Focus IF11159, The Retirement Savings Contribution Credit, by Molly F. Sherlock. 30 For more information on the nonrefundable (and refundable) portion of the child tax credit, see CRS Report R41873, The Child Tax Credit: How It Works and Who Receives It, by Margot L. Crandall-Hollick. 31 See CRS Report R42561, The American Opportunity Tax Credit: Overview, Analysis, and Policy Options, by Margot L. Crandall-Hollick.
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link to page 31 link to page 12 link to page 12 The Earned Income Tax Credit (EITC): How It Works and Who Receives It
EITC Participation Rates
According to the IRS, 78% of eligible EITC recipients received the credit for 2016 (i.e., on their 2016 income tax return), with substantial variation by number of qualifying children.32 According to data from the IRS Taxpayer the IRS Taxpayer
AdvocateAdvocate indicate that taxpayers with no qualifying children have lower participation rates than those with children. According to these data, for 2016 an estimated 65% of eligible, for 2016 an estimated 65% of eligible
EITC recipients with no qualifying children claimed the EITC, EITC recipients with no qualifying children claimed the EITC,
compared to an estimated 86% participation for those with one child, 85% participation for those with two compared to an estimated 86% participation for those with one child, 85% participation for those with two
children, and 82% participation for those with three children.children, and 82% participation for those with three children.
33 Estimates34 Participation rate estimates by state can be found in by state can be found in
Table A-4. Eligible individuals may not claimEligible individuals may not claim
the EITC for a variety of reasons. The IRS notes that nonparticipants are more the EITC for a variety of reasons. The IRS notes that nonparticipants are more
likelylikely
to be workersto be workers
who are “living in rural areas, self-employed,who are “living in rural areas, self-employed,
receiving certain disability pensions or have receiving certain disability pensions or have
children with disabilities,children with disabilities,
without a qualifying child, not proficient in English, grandparents raising their without a qualifying child, not proficient in English, grandparents raising their
grandchildren, or recentlygrandchildren, or recently
divorced, unemployed, or experienced other changes to their marital,divorced, unemployed, or experienced other changes to their marital,
financial or financial or
parental status.”parental status.”
3435 In addition, eligible In addition, eligible
workers workers who do not (and are not required to) file a federal incomewho do not (and are not required to) file a federal income
tax tax
return due to their low incomes,return due to their low incomes,
wil wil not receivenot receive
the credit.the credit.
Note that data Data on EITC receipt summarized on EITC receipt summarized
in this report are from the IRS Statistics of Income (SOI), which in this report are from the IRS Statistics of Income (SOI), which
general y provides generally provides information on credit receipt (after compliance measuresinformation on credit receipt (after compliance measures
like like audits in a given year). Hence, audits in a given year). Hence,
EITC receipt data include eligibleEITC receipt data include eligible
and ineligibleand ineligible
recipients.recipients.
For moreFor more
information, seeinformation, see
CRS Report R43873, CRS Report R43873,
The
Earned Income Tax Credit (EITC): Administrative and Compliance Chal enges, Challenges, by Margot L. by Margot L.
Crandal Crandall-Hol ick.-Hol ick.
For taxpayers whose income places them in the “phaseout range” of the credit, reducing their
For taxpayers whose income places them in the “phaseout range” of the credit, reducing their
income (income (
al all else being unchanged) else being unchanged)
wil will result in a larger EITC. (As result in a larger EITC. (As
il ustratedillustrated i i
n Figure 2,
reducing income when a taxpayer is in the phaseout range results in the taxpayer increasing the reducing income when a taxpayer is in the phaseout range results in the taxpayer increasing the
amount of the credit they receive.) A variety of forms of income can be excluded from both AGI 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 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 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 are not included in either AGI or earned income. Hence, by making these contributions, EITC
claimants whose precontribution income places them in the credit’s phaseout range claimants whose precontribution income places them in the credit’s phaseout range
wil will reduce reduce
their AGI or earned income for purposes of calculating the EITC and thus receive a their AGI or earned income for purposes of calculating the EITC and thus receive a
larger credit.larger credit.
3536
In contrast, for taxpayers whose earned income places them in the credit’s “phase-in range”,
In contrast, for taxpayers whose earned income places them in the credit’s “phase-in range”,
reducing their earned income (reducing their earned income (
al all else unchanged) else unchanged)
wil will result in a result in a
smal ersmaller EITC. (As previously EITC. (As previously
noted, the credit phases in over a range of earned income, whereas it phases out based on adjusted noted, the credit phases in over a range of earned income, whereas it phases out based on adjusted
gross income or earned income, whichever is greater.) As gross income or earned income, whichever is greater.) As
il ustratedillustrated i i
n Figure 2, reducing reducing income income
when a taxpayer is in the phase-in range results in the taxpayer reducing the amount of the credit when a taxpayer is in the phase-in range results in the taxpayer reducing the amount of the credit
they receive. Generally, they receive. Generally,
nontaxable incomeincome that is not subject to taxation (i.e., it is excluded by law) cannot be included in earned income for purposes of cannot be included in earned income for purposes of
calculating the EITC. However, as previously discussed, servicemembers may elect to include calculating the EITC. However, as previously discussed, servicemembers may elect to include
their nontaxable combat pay as earned income, for purposes of calculating the EITC. their nontaxable combat pay as earned income, for purposes of calculating the EITC.
General y, Generally, servicemembers whose income (excluding their combat pay) places them in the phase-in range servicemembers whose income (excluding their combat pay) places them in the phase-in range
wil will elect to include their combat pay in earned income for purposes of calculating the EITC in elect to include their combat pay in earned income for purposes of calculating the EITC in
order to receive a larger credit. order to receive a larger credit.
32
33 Center for Administrative Records Research and Applications, U.S. Census Center for Administrative Records Research and Applications, U.S. Census
Bureau Bureau in collaboration with IRS.in collaboration with IRS.
Data Data
can becan be
found at https://www.eitc.irs.gov/eitc-central/participation-rate/eitc-participation-rate-by-states. found at https://www.eitc.irs.gov/eitc-central/participation-rate/eitc-participation-rate-by-states.
3334 National National
T axpayerTaxpayer Advocate, Advocate,
Earned Income Tax Credit, Special, Special
Report to Congress, VolumeReport to Congress, Volume
3. Figure3. Figure
A.7. A.7.
3435 Internal Revenue Service, “About Internal Revenue Service, “About
EIT CEITC: Who are we: Who are we
missing?”missing?”
June 29, 2020June 29, 2020
, https://www.eitc.irs.gov/eitc-central/, https://www.eitc.irs.gov/eitc-central/
about-eitc/aboutabout-eitc/about
-eitc. -eitc.
35
36 In contrast, if the precontribution income places them in the plateau or the phase-in range, decreasing their earned 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.income by making certain pretax savings contributions may either have no impact or result in a smaller credit.
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The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Treatment of the EITC for Need-Tested Benefit Programs
By law, the EITC cannot be counted as income in determining eligibilityBy law, the EITC cannot be counted as income in determining eligibility
for, or the amount of, for, or the amount of,
any federal yany federally funded public benefit program, including Supplemental Nutrition Assistance funded public benefit program, including Supplemental Nutrition Assistance
Program (SNAP) food assistance, low-income housing, Medicaid, Supplemental Security Income Program (SNAP) food assistance, low-income housing, Medicaid, Supplemental Security Income
(SSI), and Temporary Assistance for Needy Families (TANF).(SSI), and Temporary Assistance for Needy Families (TANF).
3637 An EITC that is saved by the filer An EITC that is saved by the filer
does not count against the resource limits of any does not count against the resource limits of any
federal yfederally funded public benefit program for 12 funded public benefit program for 12
months after the refund is received. months after the refund is received.
Data on EITC Receipt
The EITC was first enacted in 1975 as a temporary measure meant to encourage economic 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 growth in the face of the 1974 recession and rising food and energy prices. It was also
original yoriginally intended to “assist in encouraging people to obtain employment, reducing the unemployment rate, intended to “assist in encouraging people to obtain employment, reducing the unemployment rate,
and reducing the welfare rolls.”and reducing the welfare rolls.”
3738 Over time the list of EITC objectives has grown to include Over time the list of EITC objectives has grown to include
poverty reduction. Today the EITC is the largest need-tested, antipoverty program that provides poverty reduction. Today the EITC is the largest need-tested, antipoverty program that provides
cash benefits. This section first provides a historical overview of the growth of the EITC from cash benefits. This section first provides a historical overview of the growth of the EITC from
1975 to 1975 to
20182020; it then examines information on EITC receipt for ; it then examines information on EITC receipt for
20182020. .
Trends in EITC Receipt from 1975 to 2018
When original y 2020 When originally enacted by the Tax Reduction Act of 1975 (P.L. 94-12), the EITC was a 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 temporary refundable tax credit in effect for 1975. For that year, 6.2
mil ionmillion taxpayers received taxpayers received
$1.25 $1.25
bil ion billion from the EITC (from the EITC (
or $6.0 billion in constant in constant
2018 dollars, this equals $5.8 bil ion). 2020 dollars, which adjusts for inflation). The credit was The credit was
extended several more times on a temporary basis and made permanent by the Revenue Act of 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. 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 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 changing the credit formula. For more information on the legislative history of the EITC, see
CRS Report R44825, CRS Report R44825,
The Earned Income Tax Credit (EITC): A Brief Legislative History, by , by
Margot L. Margot L.
Crandal -Hollick. Crandall-Hollick
Before 1990, the credit amount was calculated as a percentage of earned income (“the credit
Before 1990, the credit amount was calculated as a percentage of earned income (“the credit
rate”) up until the earned income amount. The credit then remained at its maximum level before rate”) up until the earned income amount. The credit then remained at its maximum level before
gradual ygradually decreasing in value as earned income increased. Legislative changes to the credit made decreasing in value as earned income increased. Legislative changes to the credit made
during this time during this time
general ygenerally increased the amount of the credit in a variety of ways, including increased the amount of the credit in a variety of ways, including
increasing the credit rate, increasing the earned income amount, increasing the phaseout amount increasing the credit rate, increasing the earned income amount, increasing the phaseout amount
threshold, and decreasing the phaseout rate. threshold, and decreasing the phaseout rate.
Beginning
Beginning
in 1990 and more in 1990 and more
substantial ysubstantially in 1993, the credit formula was revised such that the in 1993, the credit formula was revised such that the
credit amount varied based on earned income and, to a certain extent, the number of qualifying credit amount varied based on earned income and, to a certain extent, the number of qualifying
children. This revision children. This revision
essential yessentially increased the credit by family size. In addition, in 1993, increased the credit by family size. In addition, in 1993,
Congress made workers Congress made workers
without qualifying children eligible qualifying children eligible
for the EITC for the first time, for the EITC for the first time,
although the credit was although the credit was
smal ersmaller than the credit for claimants than the credit for claimants
with qualifying children. qualifying children.
36 T he T ax
37 The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (
P.L. 111-312) included a P.L. 111-312) included a
provision which made tax refunds, includingprovision which made tax refunds, including
those resulting from the those resulting from the
EIT CEITC, disregarded, disregarded
in the administration of federal in the administration of federal
programs and federally assistedprograms and federally assisted
programs. At the end of 2012, this provision programs. At the end of 2012, this provision
wa swas made permanent by the American made permanent by the American
T axpayerTaxpayer Relief Act of 2012 (P.L. 112-240). See IRC §6409. Relief Act of 2012 (P.L. 112-240). See IRC §6409.
37
38 U.S. U.S.
Congress, Senate Committee on Finance, Congress, Senate Committee on Finance,
Tax Reduction Act of 1975, Report to Accompany H.R. 2166, 94th , Report to Accompany H.R. 2166, 94th
Cong., 1st sess.,Cong., 1st sess.,
March 17, 1975, S.Rept. 94-36, p. 33. March 17, 1975, S.Rept. 94-36, p. 33.
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10 The Earned Income Tax Credit (EITC): How It Works and Who Receives It
In 2001, the credit formula was revised again so that it also varied based in part on marital status.
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 taxpayers As a result of this change, often referred to as “marriage penalty relief,” certain married taxpayers
would receive a larger credit than unmarried taxpayers with the same number of children. In would receive a larger credit than unmarried taxpayers with the same number of children. In
2009, the marriage penalty relief was expanded further and a larger credit was created for families 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 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 taxpayers receiving the EITC for 1975 to 2018. Figure 4 shows the amount of the EITC received, with dollar amounts adjusted for inflation to represent 2018
permanent by P.L. 114-113.39
How Did the American Rescue Plan Act (ARPA; P.L. 117-2) Change the EITC in
2021?
In response to the economic fallout from the COVID-19 pandemic, Congress passed several laws that included temporary provisions designed to provide financial relief to individuals and families, including the American Rescue Plan Act (ARPA; P.L. 117-2). For 2021, ARPA temporarily expanded the EITC for taxpayers with no credit qualifying children—sometimes called the “childless EITC.” It expanded the childless EITC by adjusting the formula and expanding the age range for eligible workers.40 These changes nearly tripled the maximum credit amount in 2021 and made the credit available to 19- to 24-year-olds and those 65 years and older.41 These temporary changes expired as scheduled at the end of 2021.
Figure 5 shows the number of taxpayers receiving the EITC for 1975 to 2020. Figure 6 shows the amount of the EITC received, with dollar amounts adjusted for inflation to represent 2020 dollars. The figures show the effects of the legislative expansions of the EITC, with the credit 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. experiencing growth in the late 1980s through the mid-1990s and then again in the 2000s.
Beginning (Due to data limitations, they do not include the impact of the ARPA changes.) Beginning in 2014, the total credit dollars claimed in real terms started to decline. It is unclear in 2014, the total credit dollars claimed in real terms started to decline. It is unclear
what is causing the decline. One possible explanation is that income growth among low-wage what is causing the decline. One possible explanation is that income growth among low-wage
workers over this time period has reduced the number of people qualifying for the EITC.workers over this time period has reduced the number of people qualifying for the EITC.
38 42 Another possible explanation may be that eligibleAnother possible explanation may be that eligible
poor taxpayers, concerned that they may be poor taxpayers, concerned that they may be
audited, are not claiming the credit.audited, are not claiming the credit.
39
Figure 3. Number of Tax Returns with the EITC, 1975-2018
Source: Congressional Research Service. For pre-1996 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 1996 and later data, Internal Revenue Service, 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.
As shown in Figure 4, throughout the EITC’s history, a relatively smal share of the credit has reduced regular federal income tax liability. 43
39 At the end of 2017, President Trump signed into law P.L. 115-97, commonly referred to as the Tax Cuts and Jobs Act or TCJA, which made numerous changes to the federal income tax for individuals and businesses. 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). 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.
40 For more information, see CRS Insight IN11610, The “Childless” EITC: Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2), by Margot L. Crandall-Hollick.
41 ARPA also made numerous permanent changes to the EITC, which are discussed in more detail in CRS Report R44825, The Earned Income Tax Credit (EITC): Legislative History, by Margot L. Crandall-Hollick.
42 See CRS Report R45090, Real Wage Trends, 1979 to 2019, by Sarah A. Donovan and David H. Bradley. 43 Jason DeBacker et al., “The Effects of IRS Audits on EITC Claimants,” National Tax Journal, vol. 71, no. 3 (September), pp. 451-484.
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Figure 5. Number of Tax Returns with the EITC, 1975-2020
Source: Congressional Research Service. For pre-1996 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 1996 and later data, Internal Revenue Service, 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.
As shown in Figure 6, throughout the EITC’s history, a relatively small share of the credit has reduced regular federal income tax liability. In other words, the majority of credit dollars exceed In other words, the majority of credit dollars exceed
income taxes owed after nonrefundable credits have been applied. And over time, the share of the income taxes owed after nonrefundable credits have been applied. And over time, the share of the
credit that offsets income tax liability (after nonrefundable credits) has fluctuated, but credit that offsets income tax liability (after nonrefundable credits) has fluctuated, but
general y
38 CRS Report R45090, Real Wage Trends, 1979 to 2019, by Sarah A. Donovan and David H. Bradley. 39 Jason DeBacker, Bradley T . Heim, and Anh T ran, et al., “T he Effects of IRS Audits on EIT C Claimants,” National
Tax Journal, vol. 71, no. 3 (September), pp. 451-484.
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fal engenerally fallen. This is likely. This is likely
due in part to the enactment and expansion of the child credit, which reduced due in part to the enactment and expansion of the child credit, which reduced
many EITC recipients’ income tax liabilities.many EITC recipients’ income tax liabilities.
As income tax liabilitiesAs income tax liabilities
net of nonrefundable net of nonrefundable
credits have credits have
fal enfallen, other tax liabilities, other tax liabilities
offset by the refundable portion of the EITC have offset by the refundable portion of the EITC have
increased. (Only refundable credits can offset other tax liabilities, and hence these amounts are increased. (Only refundable credits can offset other tax liabilities, and hence these amounts are
often considered part of the refundable portion of the EITC, although they are displayed often considered part of the refundable portion of the EITC, although they are displayed
separately iseparately i
n Figure 4.)
Figure 4. Total EITC Dollars, 1975-2018
Source: Congressional Research Service. 6.)
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Figure 6. Total EITC Dollars, 1975-2020
Source: Congressional Research Service. For pre-1996 data, Individual Income Tax Return ReportsFor pre-1996 data, Individual Income Tax Return Reports
are available are available
in the IRS SOI Tax Stats Archive-1954 to 1999 Individual Income Tax Return Reports.in the IRS SOI Tax Stats Archive-1954 to 1999 Individual Income Tax Return Reports.
For 1996 and later data, For 1996 and later data,
see Internal Revenue Service,see Internal Revenue Service,
Statistics of Income, SOI Tax Stats-Individual Statistical Statistical Tables by Size of Adjusted Gross
Income, Table 2.5. Table 2.5.
Notes: Constant Constant
20182020 dol ars were dol ars were
computed using the Consumer Price Index for computed using the Consumer Price Index for
al all Urban Consumers Urban Consumers
(CPI-U). For a tabular display of this information, (CPI-U). For a tabular display of this information,
see see Table A-1. a. The nonrefundable portion of the EITC is the amount of the credit that reduces incomea. The nonrefundable portion of the EITC is the amount of the credit that reduces income
tax liability that tax liability that
remainsremains
after applying nonrefundable credits (e.g.,after applying nonrefundable credits (e.g.,
the child and dependent credit and the nonrefundable portion the child and dependent credit and the nonrefundable portion
of the child tax credit). of the child tax credit).
b. The refundable portion of the EITC can offset other tax liabilitiesb. The refundable portion of the EITC can offset other tax liabilities
that are included on an income tax return, that are included on an income tax return,
including self-employmentincluding self-employment
taxes and unpaid Social Security and Medicare payrol taxes.taxes and unpaid Social Security and Medicare payrol taxes.
Because nonrefundable Because nonrefundable
credits cannot offset these taxes, these amounts are often consideredcredits cannot offset these taxes, these amounts are often considered
part of the refundable portion of the part of the refundable portion of the
credit. credit.
c. The refunded amount is the amount of the credit that remainsc. The refunded amount is the amount of the credit that remains
after (a) and (b) describedafter (a) and (b) described
above. above.
The growth in the total amount of EITC dollars in the late 1980s to the mid-1990s was due to
The growth in the total amount of EITC dollars in the late 1980s to the mid-1990s was due to
increases not only in the number of taxpayers eligible for the credit, but also in the average credit increases not only in the number of taxpayers eligible for the credit, but also in the average credit
amountamount
. Figure 5 7 shows the average EITC for 1975 to shows the average EITC for 1975 to
20182020, in inflation-adjusted (, in inflation-adjusted (
20182020) dollars. ) dollars.
Before the 1986 Tax Reform Act (P.L. 99-514), EITC thresholds were not indexed for inflation, 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 credit’s monetary and the average credit lost value each year. However, the 1986 act increased the credit’s monetary
parameters for prior inflation and adjusted the threshold amounts and maximum credits parameters for prior inflation and adjusted the threshold amounts and maximum credits
annual yannually for inflation in future years. The credit formula was also revised in 1990 and then again in 1993 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 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 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
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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.some married claimants and for families with three or more children.
4044 The average EITC for The average EITC for
20182020 was $2, was $2,
451. 276.
Figure 57. Average EITC, 1975-20182020
Source: CongressionalCongressional
Research Service.Research Service.
For pre-1996 data, U.S.For pre-1996 data, U.S.
Congress, House CommitteeCongress, House Committee
on Ways and on Ways and
Means, 2004 Green Book,Means, 2004 Green Book,
Background Material Material and Data on Programs Within the Jurisdiction of the Committee on
Ways and Means, 108th Congress, 2nd session,, 108th Congress, 2nd session,
WMCP 108-6, March 2004, WMCP 108-6, March 2004,
ppp. 41. 41
; and Individual Income Tax and Individual Income Tax
Return Reports available at the IRS SOI Tax Stats Archive-1954 to 1999 Individual Income Tax Return Reports. Return Reports available at the IRS SOI Tax Stats Archive-1954 to 1999 Individual Income Tax Return Reports.
For 1996 and later data, Internal Revenue Service,For 1996 and later data, Internal Revenue Service,
Statistics of Income, SOI Tax Stats-Individual Statistical Statistical Tables by
Size of Adjusted Gross Income, Table 2.5. Table 2.5.
Notes: Constant Constant
20182020 dol ars were dol ars were
computed using the Consumer Price Index for computed using the Consumer Price Index for
al all Urban Consumers Urban Consumers
(CPI-U). For a tabular display of this information, (CPI-U). For a tabular display of this information,
see see Table A-1.
EITC Receipt for 2018
For 2018, 26.5 mil ion taxpayers received $64.9 bil ion from the EITC. 2020 For 2020 (i.e., 2020 income tax returns filed in 2021), 26.0 million taxpayers (16% of all taxpayers filing an individual income tax return) received a total of $59.2 billion from the EITC.
By Number of Qualifying Children
Most EITC recipients, and those who received the most EITC dollars, were families with
Most EITC recipients, and those who received the most EITC dollars, were families with
children.children. Figure 68 shows total EITC dollars for shows total EITC dollars for
20182020 by number of qualifying children. For by number of qualifying children. For
2018, 3% of al 2020, 4% of all EITC dollars were received by taxpayers with no qualifying children and EITC dollars were received by taxpayers with no qualifying children and
9796% were % were
received by taxpayers with qualifying children. received by taxpayers with qualifying children.
40 T he
44 The increase in the value of the credit in 2009 is likely due increase in the value of the credit in 2009 is likely due
to the changes made by the American Recovery and 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 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. increased marriage penalty relief.
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Figure 68. Distribution of Total EITC Dollars by Number of Qualifying Children, 20182020
Source: CongressionalCongressional
Research Service,Research Service,
based on data from the Internal Revenue Service,based on data from the Internal Revenue Service,
Statistics of Income,
SOI Tax Stats-Individual Statistical Statistical Tables by Size of Adjusted Gross Income, Table 2.5. Table 2.5.
Notes: Percentages may not sum to 100% due to rounding. Total EITC for Percentages may not sum to 100% due to rounding. Total EITC for
20182020 was $ was $
64.959.2 bil ion. bil ion.
Though childless taxpayers received
Though childless taxpayers received
34% of % of
al all EITC dollars for EITC dollars for
20182020, they accounted for more , they accounted for more
than a quarter (than a quarter (
2629%) of %) of
al all EITC recipients. Thus, their EITC recipients. Thus, their
smal small share of total EITC dollars reflects, share of total EITC dollars reflects,
in part, the lower credit amount available to childless filers. in part, the lower credit amount available to childless filers.
Figure 79 shows the number of returns with the EITC for shows the number of returns with the EITC for
20182020 by number of qualifying children. by number of qualifying children.
Figure 810 shows the average EITC for shows the average EITC for
20182020 by number of qualifying children. The average EITC by number of qualifying children. The average EITC
for for
20182020 increased with the number of qualifying children: increased with the number of qualifying children:
• The EITC was received by The EITC was received by
6.9 mil ion7.6 million taxpayers with no qualifying children, taxpayers with no qualifying children,
with an average credit of $
with an average credit of $
302295. .
• The EITC was received by 9. The EITC was received by 9.
6 mil ion2 million filers with one qualifying child, with an filers with one qualifying child, with an
average credit of $2,
average credit of $2,
396331. .
• The EITC was received by 6. The EITC was received by 6.
6 mil ion0 million filers with two qualifying children, with filers with two qualifying children, with
an average credit of $3,
an average credit of $3,
847722. .
• The EITC was received by 3. The EITC was received by 3.
3 mil ion2 million filers with three or more qualifying filers with three or more qualifying
children, with an average credit of $4,
children, with an average credit of $4,
311139. .
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Figure 79. Number of Tax Returns with the EITC by Number of Qualifying Children,
20182020
Source: CongressionalCongressional
Research Service,Research Service,
based on data from the Internal Revenue Service,based on data from the Internal Revenue Service,
Statistics of Income,
SOI Tax Stats-Individual Statistical Statistical Tables by Size of Adjusted Gross Income, Table 2.5. Table 2.5.
Notes: Detail does not add to total because of rounding. For detail on returns with the EITC by AGI and Detail does not add to total because of rounding. For detail on returns with the EITC by AGI and
number of qualifying children,number of qualifying children,
see see Table A-2.
Figure 810. Average EITC by Number of Qualifying Children, 20182020
Source: CongressionalCongressional
Research Service,Research Service,
based on data from the Internal Revenue Service,based on data from the Internal Revenue Service,
Statistics of Income,
SOI Tax Stats-Individual Statistical Statistical Tables by Size of Adjusted Gross Income, Table 2.5. Table 2.5.
Note: For detail on returns with the EITC by AGI and number of qualifying children, For detail on returns with the EITC by AGI and number of qualifying children,
see see Table A-2.
By Income Level
Though the EITC is targeted toward lower-income earners, taxpayers with children may receive the EITC even with income well above the poverty level. (The federal poverty level for a family
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2833 The Earned Income Tax Credit (EITC): How It Works and Who Receives It
By Income Level
Though the EITC is targeted toward lower-income earners, taxpayers with children may receive the EITC even with income wel above the poverty level. (The federal poverty level for a family of three is $21,720 in 2020; it was $20,780 in 2018of three is $21,720 in 2020.) However, the largest EITC benefits are .) However, the largest EITC benefits are
focused on low-income earners near the poverty line, with those with greater earned income focused on low-income earners near the poverty line, with those with greater earned income
receiving reduced benefits. receiving reduced benefits.
Figure 911 shows the number of tax returns with the EITC for shows the number of tax returns with the EITC for
20182020 by adjusted gross income by adjusted gross income
(AGI) level(AGI) level
. . Figure 911 shows that the $10,000-$14,999 AGI bracket accounted for the greatest shows that the $10,000-$14,999 AGI bracket accounted for the greatest
number of number of
2082020 tax returns that included the EITC— tax returns that included the EITC—
5.8 mil ion. For 2018, close to half (45%) of al 4.6 million. For 2020, about half (43%) of all returns with the EITC had AGIs below $15,000. For context, a full-time full-year worker returns with the EITC had AGIs below $15,000. For context, a full-time full-year worker
earning the federal minimum wage would have an AGI of $15,080.earning the federal minimum wage would have an AGI of $15,080.
41 45
Figure 911 also shows the average EITC per return by AGI category. Average EITC benefits first also shows the average EITC per return by AGI category. Average EITC benefits first
increase with AGI, then decline. This outcome reflects the formula for determining the EITC, 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 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 (seit is phased out above a certain income threshold (se
e Table 1 andand Figure 2). It also reflects a . It also reflects a
difference in the mix of family types receiving the EITC in the various AGI categories. For difference in the mix of family types receiving the EITC in the various AGI categories. For
example, nearly three-quarters (example, nearly three-quarters (
7371%) of %) of
al all EITC recipients with AGIs of less than $5,000 had no EITC recipients with AGIs of less than $5,000 had no
qualifying children. qualifying children.
Al All EITC recipients with AGIs above $25,000 for EITC recipients with AGIs above $25,000 for
20172020 had qualifying had qualifying
children, and hence were eligiblechildren, and hence were eligible
for a larger maximum EITC benefit than filers without children. for a larger maximum EITC benefit than filers without children.
For detail on returns with the EITC by AGI and number of qualifying children, For detail on returns with the EITC by AGI and number of qualifying children,
seesee Table A-2.
41
45 40 hours per week for 52 weeks 40 hours per week for 52 weeks
a year at $7.25 per hour. a year at $7.25 per hour.
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Figure 911. Number of Tax Returns with the EITC and Average EITC per Return by
Adjusted Gross Income (AGI), 20182020
Source: CongressionalCongressional
Research Service,Research Service,
based on data from the Internal Revenue Service,based on data from the Internal Revenue Service,
Statistics of Income,
SOI Tax Stats-Individual Statistical Statistical Tables by Size of Adjusted Gross Income, Table 2.5. Table 2.5.
Notes: For detail on returns with the EITC by AGI and number of qualifying children, For detail on returns with the EITC by AGI and number of qualifying children,
seesee Table A-2. The The AGI AGI
categoriescategories
are defined such that the lowerare defined such that the lower
bound is inclusive but upper bound is not inclusive.bound is inclusive but upper bound is not inclusive.
Hence AGI “$5K-Hence AGI “$5K-
$10K” includes taxpayers with AGI $5,000 or more$10K” includes taxpayers with AGI $5,000 or more
to under $10,000. to under $10,000.
By Filing and Marital Status
The IRS’s National Taxpayer Advocate (NTA) provided data on EITC receipt by filing
The IRS’s National Taxpayer Advocate (NTA) provided data on EITC receipt by filing
status in a status in a
special 2019 report to Congress (the IRS does not routinely provide data on EITC receipt by special 2019 report to Congress (the IRS does not routinely provide data on EITC receipt by
filing status in the Statistics of Income annual data releases). According to the NTA report, for filing status in the Statistics of Income annual data releases). According to the NTA report, for
2017, unmarried taxpayers (head of household and single filing statuses) received approximately 2017, unmarried taxpayers (head of household and single filing statuses) received approximately
three-quarters of three-quarters of
al all EITC dollars, with over half (59%) received by unmarried taxpayers with one EITC dollars, with over half (59%) received by unmarried taxpayers with one
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or two qualifying
or two qualifying
children.children. Figure 1012 shows estimates of the distribution of total EITC dollars by shows estimates of the distribution of total EITC dollars by
filingmarital status and number of qualifying children for 2017. status and number of qualifying children for 2017.
Figure 1012. Distribution of Total EITC Dollars by Marital Status and Number of
Qualifying Children, 2017
Source: National Taxpayer Advocate, National Taxpayer Advocate,
Earned Income Tax Credit,,
Special Report to Congress,Special Report to Congress,
Volume 3. Table Volume 3. Table
A.5. A.5.
By Region
For
For
2018, 18% of al 2020, 16% of all taxpayers received the EITC. However, the share of taxpayers receiving the taxpayers received the EITC. However, the share of taxpayers receiving the
EITC varies considerably by state. For EITC varies considerably by state. For
20182020, the state with the highest percentage of returns , the state with the highest percentage of returns
receiving the EITC was Mississippi, with receiving the EITC was Mississippi, with
3027% of % of
al all filers receiving the credit. In contrast, filers receiving the credit. In contrast,
11%
of al 9% of all taxpayers in New Hampshire received the EITC for that year. taxpayers in New Hampshire received the EITC for that year.
Figure 1113 provides a map showing the percentage of provides a map showing the percentage of
al 2017all 2020 federal income tax returns that federal income tax returns that
included an EITC for each state. In addition to considerable state variation, the map shows that included an EITC for each state. In addition to considerable state variation, the map shows that
there is a regional pattern to EITC receipt. A greater share of taxpayers in certain southern states there is a regional pattern to EITC receipt. A greater share of taxpayers in certain southern states
received the EITC than those in other regions of the country. The EITC was received on the received the EITC than those in other regions of the country. The EITC was received on the
smal estsmallest percentage of returns in New England, as percentage of returns in New England, as
wel well as some states in the northern Midwest.as some states in the northern Midwest.
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Figure 1113. Percentage of Tax Returns with the EITC by State, 2018
AK
ME
WI
VT
NH
WA
MT
ND MN
IL
MI
NY
MA
OR
NV
WY
SD
IA
IN
OH
PA
NJ
CT
RI
CA
UT
CO
NE
MO
KY
WV
VA
MD
DE
< 15%
AZ
NM
KS
AR
TN
NC
SC
DC
15% - 20%
OK
LA
MS
AL
GA
20% - 25%
HI
TX
FL
> 25%2020
Source: CongressionalCongressional
Research Service,Research Service,
based on data from the Internal Revenue Service,based on data from the Internal Revenue Service,
Statistics of Income,
SOI Tax Stats-Historic , Historic Table 2Table 2
, (Total File, (Total File,
Al All States)States)
, at https://www.irs.gov/statistics/soi-tax-stats-historic-table- at https://www.irs.gov/statistics/soi-tax-stats-historic-table-
2.2.
Notes: For details on EITC returns by state, see For details on EITC returns by state, see
Table A-3.
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Appendix. Additional Tables
Table A-1. EITC Receipt, 1975-20182020
In millions of nominal dollars
In millions of constant 20182020 dollars
Total Refundable
Total Refundable
Portion
Portion
Tax
Returns
with
Reduces
Reduces
EITC
Total
Refunded
Other
Average
Total
Refunded
Other
Average
Year (Millions)
EITC
Amount
Taxes
EITC
EITC
Amount
Taxes
EITC
1975
1975
6.215
6.215
$1,250$1,250
$887
$887
$111
$111
$201
$201
$
$
5,8346,013
$4,
$4,
139
$518
$939266
$534
$968
1976
1976
6.473
6.473
$1,295$1,295
$935
$935
$119
$119
$200
$200
$5,
$5,
714890
$4,
$4,
127
$523
$883253
$539
$910
1977
1977
5.627
5.627
$1,127$1,127
$875
$875
$106
$106
$200
$200
$4,
$4,
668811
$3,
$3,
624
$441
$830735
$454
$855
1978
1978
5.192
5.192
$1,048$1,048
$801
$801
$94
$94
$202
$202
$4,
$4,
037161
$3,
$3,
086
$363
$778180
$374
$801
1979
1979
7.135
7.135
$2,052$2,052
$1,395
$1,395
$161
$161
$288
$288
$7,
$7,
097315
$4,
$4,
826
$557
$995974
$574
$1,025
1980
1980
6.954
6.954
$1,986$1,986
$1,370
$1,370
$164
$164
$286
$286
$6,
$6,
052238
$4,
$4,
175
$501
$870304
$517
$897
1981
1981
6.717
6.717
$1,912$1,912
$1,278
$1,278
$181
$181
$285
$285
$5,
$5,
281443
$3,
$3,
531
$499
$786640
$515
$810
1982
1982
6.395
6.395
$1,775$1,775
$1,222
$1,222
$194
$194
$278
$278
$4,
$4,
620761
$3,
$3,
179
$505
$722276
$521
$745
1983
1983
7.368
7.368
$1,794$1,794
$1,289
$1,289
$190
$190
$243
$243
$4,
$4,
522661
$3,
$3,
250
$479
$614350
$494
$633
1984
1984
6.376
6.376
$1,636$1,636
$1,162
$1,162
$193
$193
$257
$257
$
$
3,9534,074
$2,
$2,
807
$467
$620894
$481
$639
1985
1985
7.432
7.432
$2,088$2,088
$1,499
$1,499
$209
$209
$281
$281
$
$
4,8725,021
$3,
$3,
498
$488
$656605
$503
$676
1986
1986
7.156
7.156
$2,009$2,009
$1,479
$1,479
$201
$201
$281
$281
$4,
$4,
604745
$3,
$3,
388
$460
$643491
$474
$663
1987
1987
8.738
8.738
$3,931$3,931
$2,930
$2,930
$359
$359
$450
$450
$8,
$8,
688955
$6,
$6,
476
$794
$994674
$818
$1,025
1988
1988
11.148
11.148
$5,896$5,896
$4,257
$4,257
$537
$537
$529 $12,
$529 $12,
516900
$9,
$9,
037314
$1,
$1,
139 174
$1,
$1,
123157
1989
1989
11.696
11.696
$6,595$6,595
$4,636
$4,636
$580
$580
$564 $13,
$564 $13,
356766
$9,
$9,
387675
$1,
$1,
175 211
$1,
$1,
142177
1990
1990
12.542
12.542
$7,542$7,542
$5,266
$5,266
$659
$659
$601 $14,
$601 $14,
490935
$10,
$10,
117428
$1,
$1,
267 306
$1,
$1,
155191
1991
1991
13.665
13.665
$11,105$11,105
$8,183
$8,183
$840
$840
$813 $
$813 $
20,47421,102
$15,
$15,
087550
$1,
$1,
548 596
$1,
$1,
498544
1992
1992
14.097
14.097
$13,028$13,028
$9,959
$9,959
$1,010
$1,010
$924 $
$924 $
23,317
$17,824
$1,808
$1,65424,033
$18,371
$1,864
$1,705
1993
1993
15.117
15.117
$15,537$15,537
$12,028
$12,028
$1,208
$1,208
$1,028 $
$1,028 $
26,999
$20,902
$2,100
$1,78627,828
$21,543
$2,164
$1,841
1994
1994
19.017
19.017
$21,105$21,105
$16,598
$16,598
$1,722
$1,722
$1,110 $
$1,110 $
35,76036,857
$28,
$28,
123
$2,918
$1,880985
$3,007
$1,938
1995
1995
19.334
19.334
$25,956$25,956
$20,829
$20,829
$1,981
$1,981
$1,342 $
$1,342 $
42,767
$34,319
$3,264
$2,21244,079
$35,372
$3,364
$2,280
1996
1996
19.464
19.464
$28,825$28,825
$23,157
$23,157
$2,105
$2,105
$1,481 $
$1,481 $
46,133
$37,061
$3,369
$2,37047,548
$38,199
$3,472
$2,443
1997
1997
19.391
19.391
$30,389$30,389
$24,396
$24,396
$2,225
$2,225
$1,567 $
$1,567 $
47,544
$38,168
$3,481
$2,45249,002
$39,339
$3,588
$2,527
1998
1998
20.273
20.273
$31,592$31,592
$27,002
$27,002
$2,358
$2,358
$1,558 $
$1,558 $
48,668
$41,597
$3,633
$2,40150,161
$42,873
$3,744
$2,474
1999
1999
19.259
19.259
$31,901$31,901
$27,604
$27,604
$2,379
$2,379
$1,656 $
$1,656 $
48,083
$41,606
$3,586
$2,49749,558
$42,883
$3,696
$2,573
2000
2000
19.277
19.277
$32,296$32,296
$27,804
$27,804
$2,524
$2,524
$1,675 $
$1,675 $
47,095
$40,545
$3,680
$2,44348,540
$41,788
$3,793
$2,518
2001
2001
19.593
19.593
$33,376$33,376
$29,043
$29,043
$2,863
$2,863
$1,703 $
$1,703 $
47,323
$41,179
$4,059
$2,41548,775
$42,443
$4,184
$2,489
2002
2002
21.574
21.574
$38,199$38,199
$33,737
$33,737
$3,347
$3,347
$1,771 $
$1,771 $
53,318
$47,091
$4,671
$2,47154,954
$48,535
$4,815
$2,547
Congressional Research Service
Congressional Research Service
2226
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
In millions of nominal dollars
In millions of constant 2018 dollars2020 dollars
Total Refundable
Total Refundable
Portion
Portion
Tax
Returns
with
Reduces
Reduces
EITC
Total
Refunded
Other
Average
Total
Refunded
Other
Average
Year (Millions)
EITC
Amount
Taxes
EITC
EITC
Amount
Taxes
EITC
2003
2003
22.112
22.112
$38,657$38,657
$34,012
$34,012
$3,718
$3,718
$1,748 $
$1,748 $
52,756
$46,417
$5,074
$2,38654,374
$47,841
$5,230
$2,459
2004
2004
22.270
22.270
$40,024$40,024
$35,300
$35,300
$3,957
$3,957
$1,797 $
$1,797 $
53,204
$46,924
$5,260
$2,38954,837
$48,364
$5,421
$2,462
2005
2005
22.752
22.752
$42,410$42,410
$37,465
$37,465
$4,200
$4,200
$1,864 $
$1,864 $
54,529
$48,171
$5,400
$2,39756,202
$49,649
$5,565
$2,470
2006
2006
23.042
23.042
$44,388$44,388
$39,072
$39,072
$4,518
$4,518
$1,926 $
$1,926 $
55,288
$48,667
$5,628
$2,39956,984
$50,160
$5,800
$2,473
2007
2007
24.584
24.584
$48,540$48,540
$42,508
$42,508
$5,098
$5,098
$1,974 $
$1,974 $
58,786
$51,480
$6,174
$2,39160,589
$53,060
$6,364
$2,465
2008
2008
24.756
24.756
$50,669$50,669
$44,260
$44,260
$5,438
$5,438
$2,047 $
$2,047 $
59,095
$51,621
$6,343
$2,38760,908
$53,204
$6,537
$2,460
2009
2009
27.041
27.041
$59,239$59,239
$53,985
$53,985
$4,765
$4,765
$2,191 $
$2,191 $
69,337
$63,188
$5,577
$2,56471,465
$65,126
$5,748
$2,643
2010
2010
27.368
27.368
$59,562$59,562
$54,256
$54,256
$4,855
$4,855
$2,176 $
$2,176 $
68,590
$62,480
$5,591
$2,50670,694
$64,397
$5,762
$2,583
2011
2011
27.912
27.912
$62,906$62,906
$55,350
$55,350
$6,469
$6,469
$2,254 $
$2,254 $
70,224
$61,790
$7,221
$2,51672,379
$63,685
$7,443
$2,593
2012
2012
27.848
27.848
$64,129$64,129
$56,190
$56,190
$6,726
$6,726
$2,303 $
$2,303 $
70,137
$61,455
$7,356
$2,51972,289
$63,340
$7,582
$2,596
2013
2013
28.822
28.822
$68,084$68,084
$59,145
$59,145
$7,645
$7,645
$2,362 $
$2,362 $
73,389
$63,753
$8,241
$2,54675,640
$65,708
$8,494
$2,624
2014
2014
28.538
28.538
$68,339$68,339
$58,889
$58,889
$8,063
$8,063
$2,395 $
$2,395 $
72,488
$62,464
$8,553
$2,54074,712
$64,380
$8,815
$2,618
2015
2015
28.082
28.082
$68,525$68,525
$58,795
$58,795
$8,240
$8,240
$2,440 $
$2,440 $
72,599
$62,290
$8,730
$2,58574,826
$64,201
$8,998
$2,665
2016
2016
27.385
27.385
$66,723$66,723
$57,054
$57,054
$8,266
$8,266
$2,436 $
$2,436 $
69,809
$59,693
$8,649
$2,54971,951
$61,524
$8,914
$2,627
2017
2017
27.030
27.030
$66,443$66,443
$56,751
$56,751
$8,176
$8,176
$2,458 $
$2,458 $
68,066
$58,137
$8,375
$2,51870,154
$59,921
$8,632
$2,595
2018
2018
26.492
26.492
$64,924$64,924
$56,161
$56,161
$8,145
$8,145
$2,451 $
$2,451 $
64,924
$56,161
$8,145
$2,451
Source: Congressional Research Service. For pre-1996 data, see 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, pp66,915
$57,884
$8,395
$2,526
2019
26.738 $64,478
$55,672
$8,155
$2,411 $65,273
$56,359
$8,256
$2,441
2020
26.026 $59,240
$51,739
$6,816
$2,276 $59,240
$51,739
$6,816
$2,276
Source: Congressional Research Service. For pre-1996 data, see 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 Cong., 2nd sess., WMCP 108-6, March 2004, p. 41; and Individual Income Tax . 41; and Individual Income Tax
Return Reports available at the IRS SOI Tax Stats Archive-1954 to 1999 Individual Income Tax Return Reports. Return Reports available at the IRS SOI Tax Stats Archive-1954 to 1999 Individual Income Tax Return Reports.
For 1996 and later data, see Internal Revenue Service,For 1996 and later data, see Internal Revenue Service,
Statistics of Income, SOI Tax Stats-Individual Statistical Statistical Tables
by Size of Adjusted Gross Income, Table 2.5. Table 2.5.
Note: Constant Constant
20182020 dol ars dol ars
were computed using the annual average (notwere computed using the annual average (not
-seasonal y seasonally adjusted) Consumer Price adjusted) Consumer Price
Index for Index for
al all Urban ConsumersUrban Consumers
(CPI-U) from the Bureau of Labor Statistics. (CPI-U) from the Bureau of Labor Statistics.
Congressional Research Service
27
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Table A-2. Average EITC, Number of Tax Returns with the EITC, and Total EITC
by Qualifying Children and Adjusted Gross Income, 20182020
Three or
No
One
Two
More
Qualifying
Qualifying
Qualifying
Qualifying
AGI
Total
Children
Child
Children
Children
Average EITC
Less
Less
than $5,000 than $5,000
$
$
511
$218
$1,158
$1,518
$1,847857
$223
$1,923
$2,968
$3,050
$5,000 to $9,999
$5,000 to $9,999
$1,
$1,
344
$462
$2,652
$3,077
$3,378363
$449
$2,712
$3,737
$4,312
$10,000 to $14,999
$10,000 to $14,999
$2,
$2,
508
$235
$3,415
$5,162
$5,829
Congressional Research Service
23
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Three or
No
One
Two
More
Qualifying
Qualifying
Qualifying
Qualifying
AGI
Total
Children
Child
Children
Children004
$255
$3,403
$5,083
$5,628
$15,000 to $19,999
$15,000 to $19,999
$
$
4,282
$185
$3,398
$5,625
$6,3443,723
$147
$3,357
$5,543
$6,342
$20,000 to $24,999
$20,000 to $24,999
$
$
4,038
$35
$2,896
$5,057
$5,8173,938
$65
$2,969
$5,058
$5,956
$25,000 to $29,999
$25,000 to $29,999
$3,
$3,
222432
$0
$0
$2,
$2,
177357
$4,
$4,
139347
$5,
$5,
030133
$30,000 to $34,999
$30,000 to $34,999
$2,
$2,
411612
$0
$0
$1,
$1,
435608
$3,
$3,
083
$3,959421
$4,286
$35,000 to $39,999
$35,000 to $39,999
$1,
$1,
564797
$0
$0
$
$
659868
$2,
$2,
197462
$3,
$3,
055317
$40,000 to $44,999
$40,000 to $44,999
$1,
$1,
242375
$0
$0
$
$
460466
$1,
$1,
212515
$2,
$2,
036454
$45,000 and higher
$45,000 and higher
$
$
754800
$0
$0
$0
$0
$
$
609
$929
Al
$2,451
$302
$2,396
$3,847
$4,311678
$1,065
All
$2,276
$295
$2,331
$3,722
$4,139
Tax Returns with the EITC
Less
Less
than $5,000 than $5,000
2,
2,
351,171
1,722,894
409,966
156,507
61,804995,003
2,125,630
479,332
247,603
142,438
$5,000 to $9,999
$5,000 to $9,999
3,
3,
659,936
2,301,641
858,594
359,425
140,274491,536
2,331,093
694,609
312,877
152,959
$10,000 to $14,999
$10,000 to $14,999
5,786,910
2,512,229
1,859,511
1,011,105
404,067
$15,000 to $19,999
3,411,413
351,250
1,380,101
1,120,351
559,712
$20,000 to $24,999
2,728,099
47,719
1,328,734
917,142
434,505
$25,000 to $29,999
2,600,123
0
1,396,290
806,103
397,730
$30,000 to $34,999
2,220,011
0
1,088,249
787,962
343,801
$35,000 to $39,999
1,979,950
0
1,005,133
634,287
340,530
$40,000 to $44,999
1,054,304
0
248,147
540,604
265,553
$45,000 and higher
700,570
0
33,644
295,077
371,849
Total
26,492,487
6,935,733
9,608,369
6,628,563
3,319,825
Total EITC ($ in Thousands)
Less than $5,000
$1,201,920
$375,563
$474,669
$237,550
$114,143
$5,000 to $9,999
$4,919,147
$1,062,593
$2,276,586
$1,106,079
$473,891
$10,000 to $14,999
$14,516,061
$590,473
$6,350,950
$5,219,211
$2,355,429
$15,000 to $19,999
$14,607,305
$64,815
$4,690,167
$6,301,634
$3,550,689
$20,000 to $24,999
$11,015,573
$1,673
$3,848,036
$4,638,376
$2,527,488
$25,000 to $29,999
$8,376,705
$0
$3,039,687
$3,336,308
$2,000,709
$30,000 to $34,999
$5,352,729
$0
$1,562,135
$2,429,458
$1,361,136
$35,000 to $39,999
$3,096,290
$0
$662,264
$1,393,588
$1,040,439
$40,000 to $44,999
$1,309,892
$0
$114,137
$654,987
$540,768
$45,000 and higher
$527,931
$0
$2,737
$179,628
$345,567
Total
$64,923,553
$2,095,117
$23,021,368
$25,496,819
$14,310,259
Source: Congressional Research Service, based on data from the Internal Revenue Service, Statistics of Income,
SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.
Congressional Research Service
24
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Table A-3. EITC Receipt by State, 20184,605,282
2,528,901
1,249,472
586,523
240,388
$15,000 to $19,999
2,969,373
567,744
1,213,817
796,323
391,490
$20,000 to $24,999
2,573,195
83,346
1,332,897
801,877
355,074
$25,000 to $29,999
2,587,027
0
1,345,767
844,368
396,892
$30,000 to $34,999
2,385,991
0
1,256,232
729,381
400,377
$35,000 to $39,999
2,095,093
0
1,070,501
659,566
365,025
$40,000 to $44,999
1,323,368
0
448,204
571,977
303,187
$45,000 and higher
999,841
0
106,935
444,488
448,418
Total
26,025,709
7,636,714
9,197,766
5,994,983
3,196,248
Total EITC ($ in Thousands)
Less than $5,000
$2,565,514
$474,603
$921,740
$734,774
$434,396
$5,000 to $9,999
$4,760,272
$1,047,569
$1,884,070
$1,169,083
$659,549
$10,000 to $14,999
$9,230,114
$644,266
$4,251,524
$2,981,497
$1,352,826
$15,000 to $19,999
$11,054,759
$83,186
$4,075,177
$4,413,688
$2,482,707
$20,000 to $24,999
$10,133,674
$5,443
$3,957,297
$4,055,946
$2,114,988
$25,000 to $29,999
$8,879,654
$0
$3,171,788
$3,670,463
$2,037,403
$30,000 to $34,999
$6,231,557
$0
$2,020,138
$2,495,554
$1,715,865
$35,000 to $39,999
$3,764,221
$0
$929,317
$1,623,978
$1,210,927
Congressional Research Service
28
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Three or
No
One
Two
More
Qualifying
Qualifying
Qualifying
Qualifying
AGI
Total
Children
Child
Children
Children
$40,000 to $44,999
$1,819,594
$0
$208,808
$866,747
$744,039
$45,000 and higher
$800,327
$0
$21,337
$301,261
$477,731
Total
$59,239,686
$2,255,067
$21,441,196
$22,312,991
$13,230,431
Source: Congressional Research Service, based on data from the Internal Revenue Service, Statistics of Income, SOI Tax Stats-Individual Statistical Tables by Size of Adjusted Gross Income, Table 2.5.
Congressional Research Service
29
link to page 36 The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Table A-3. EITC Receipt by State, 2020
Percentage
Tax
of Total
Returns
Tax
Total
Percentage
Total Tax
with
Returns
EITC
Average
of Credit
State or Area
Returns
EITC
with EITC
(millions)
EITC
RefundedaRefundeda
United States
United States
153,455,990 26,142,740
17.0%
$64,061
$2,450
86.6%
Alabama
2,062,260
481,700
23.4%
$1,349
$2,800
89.6%
Alaska
348,990
45,960
13.2%
$97
$2,109
90.1%
Arizona
3,094,210
576,720
18.6%
$1,480
$2,566
87.9%
Arkansas
1,236,750
288,810
23.4%
$773
$2,678
88.7%
California
18,175,520
2,926,160
16.1%
$6,740
$2,303
83.4%
Colorado
2,765,420
343,460
12.4%
$745
$2,170
85.3%
Connecticut
1,768,690
221,490
12.5%
$492
$2,222
87.7%
Delaware
469,860
73,850
15.7%
$176
$2,384
90.8%
District of Columbia
350,010
50,200
14.3%
$117
$2,331
88.2%
Florida
10,229,050
2,179,310
21.3%
$5,377
$2,467
83.9%
Georgia
4,581,030
1,071,370
23.4%
$2,945
$2,749
86.2%
Hawai
694,860
96,910
13.9%
$209
$2,157
88.6%
Idaho
783,400
128,030
16.3%
$294
$2,296
86.9%
Il inois
6,116,510
943,370
15.4%
$2,342
$2,483
86.7%
Indiana
3,150,350
519,670
16.5%
$1,259
$2,422
89.5%
Iowa
1,458,970
198,710
13.6%
$457
$2,300
89.4%
Kansas
1,335,070
200,140
15.0%
$476
$2,379
89.5%
Kentucky
1,921,470
385,990
20.1%
$952
$2,466
88.7%
Louisiana
1,962,700
500,940
25.5%
$1,434
$2,863
88.4%
Maine
666,480
97,020
14.6%
$203
$2,093
86.3%
Maryland
3,004,390
406,880
13.5%
$940
$2,310
85.8%
Massachusetts
3,488,510
392,470
11.3%
$824
$2,100
87.7%
Michigan
4,786,230
763,940
16.0%
$1,900
$2,487
87.2%
Minnesota
2,796,040
324,340
11.6%
$710
$2,190
88.1%
Mississippi
1,227,720
364,350
29.7%
$1,057
$2,901
88.9%
Missouri
2,809,860
488,370
17.4%
$1,195
$2,447
89.1%
Montana
511,440
76,270
14.9%
$164
$2,155
87.6%
Nebraska
909,600
128,740
14.2%
$304
$2,363
89.2%
Nevada
1,449,560
261,980
18.1%
$632
$2,414
87.5%
New Hampshire
712,090
72,140
10.1%
$141
$1,952
86.9%
New Jersey
4,462,740
599,550
13.4%
$1,402
$2,338
85.1%
New Mexico
929,110
204,320
22.0%
$501
$2,450
90.7%
New York
9,742,580
1,662,500
17.1%
$3,864
$2,324
84.3%
Congressional Research Service
25
link to page 28 link to page 28 link to page 30 link to page 30 The Earned 164,041,940 25,553,580
16%
$58,190
$2,277
88%
Alabama
2,246,870
475,900
21%
$1,246
$2,618
90%
Alaska
359,870
45,300
13%
$91
$2,010
91%
Arizona
3,450,640
565,090
16%
$1,341
$2,372
89%
Arkansas
1,351,370
288,910
21%
$732
$2,534
90%
California
19,556,780
2,782,630
14%
$5,740
$2,063
86%
Colorado
2,934,530
332,200
11%
$678
$2,040
86%
Connecticut
1,858,430
212,650
11%
$436
$2,050
88%
Delaware
510,060
73,840
14%
$165
$2,239
91%
District of Columbia
353,430
47,270
13%
$101
$2,131
89%
Florida
11,232,230
2,221,280
20%
$5,099
$2,295
84%
Georgia
5,069,700
1,073,310
21%
$2,705
$2,521
87%
Hawaii
707,510
90,860
13%
$181
$1,994
90%
Idaho
868,550
126,450
15%
$276
$2,184
88%
Il inois
6,297,580
904,880
14%
$2,081
$2,300
88%
Indiana
3,337,840
518,830
16%
$1,188
$2,289
91%
Iowa
1,550,180
193,130
12%
$422
$2,183
90%
Kansas
1,404,880
199,160
14%
$449
$2,255
90%
Kentucky
2,076,680
384,590
19%
$895
$2,326
90%
Louisiana
2,082,460
496,170
24%
$1,320
$2,660
90%
Maine
714,510
89,950
13%
$175
$1,946
87%
Maryland
3,135,300
401,570
13%
$860
$2,141
87%
Massachusetts
3,646,160
356,180
10%
$676
$1,898
89%
Michigan
5,031,270
714,200
14%
$1,601
$2,242
89%
Minnesota
2,890,450
308,970
11%
$631
$2,043
89%
Mississippi
1,328,290
353,980
27%
$949
$2,681
90%
Missouri
3,009,120
492,500
16%
$1,134
$2,303
90%
Montana
551,690
73,590
13%
$149
$2,026
88%
Nebraska
948,280
124,640
13%
$280
$2,249
90%
Nevada
1,598,330
265,230
17%
$585
$2,206
89%
New Hampshire
744,780
67,550
9%
$123
$1,820
88%
New Jersey
4,701,870
580,100
12%
$1,241
$2,139
87%
New Mexico
995,280
196,600
20%
$454
$2,311
91%
New York
10,159,910
1,529,850
15%
$3,256
$2,128
88%
Congressional Research Service
30
link to page 36 link to page 33 link to page 33 link to page 35 link to page 35 The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Percentage
Tax
of Total
Returns
Tax
Total
Percentage
Total Tax
with
Returns
EITC
Average
of Credit
State or Area
Returns
EITC
with EITC
(millions)
EITC
RefundedaRefundeda
North Carolina
North Carolina
4,638,600
913,240
19.7%
$2,277
$2,493
87.75,077,390
917,200
18%
$2,134
$2,326
88% %
North Dakota
North Dakota
363,760373,520
42,
42,
760320
11
11
.8% %
$
$
9489
$2,
$2,
194
89.7111
91% %
Ohio
Ohio
5,
5,
624,050
903,470
16.1%
$2,217
$2,453
89.3897,590
884,200
15%
$2,029
$2,295
90%
Oklahoma
1,780,050
341,060
19%
$826
$2,423
89%
Oregon
2,084,220
256,720
12%
$504
$1,964
89%
Pennsylvania
6,546,960
841,160
13%
$1,759
$2,091
91%
Rhode Island
576,050
74,860
13%
$153
$2,049
90%
South Carolina
2,519,240
485,360
19%
$1,159
$2,388
89%
South Dakota
443,220
58,700
13%
$126
$2,152
91%
Tennessee
3,349,310
616,380
18%
$1,467
$2,380
87%
Texas
13,788,840
2,694,970
20%
$6,939
$2,575
86%
Utah
1,495,630
183,610
12%
$397
$2,161
88%
Vermont
344,800
38,870
11%
$71
$1,826
87%
Virginia
4,245,600
591,230
14%
$1,303
$2,204
88%
Washington
3,847,130
391,300
10%
$786
$2,009
89%
West Virginia
816,790
140,020
17%
$315
$2,249
92%
Wisconsin
2,998,950
357,520
12%
$766
$2,141
91%
Wyoming
286,780
36,170
13%
$76
$2,094
90%
Other Areas
865,070
14,580
2%
$31
$2,134
96%
Source: Congressional Research Service, based on data from the Internal Revenue Service, Statistics of Income, SOI Tax Stats, Historic Table 2 (Total File, All States),%
Oklahoma
1,639,850
330,840
20.2%
$845
$2,553
88.1%
Oregon
1,965,610
265,330
13.5%
$555
$2,093
87.8%
Pennsylvania
6,260,030
907,050
14.5%
$2,067
$2,278
89.6%
Rhode Island
541,700
81,480
15.0%
$186
$2,279
88.4%
South Carolina
2,276,120
478,920
21.0%
$1,226
$2,560
88.8%
South Dakota
421,160
59,670
14.2%
$135
$2,257
90.3%
Tennessee
3,055,660
617,790
20.2%
$1,572
$2,544
86.8%
Texas
12,640,440
2,670,340
21.1%
$7,272
$2,723
84.8%
Utah
1,363,530
185,250
13.6%
$425
$2,292
87.7%
Vermont
328,540
41,630
12.7%
$81
$1,945
85.6%
Virginia
3,983,910
596,880
15.0%
$1,398
$2,343
87.3%
Washington
3,623,110
416,530
11.5%
$900
$2,161
88.2%
West Virginia
765,060
143,210
18.7%
$337
$2,356
91.6%
Wisconsin
2,875,130
358,720
12.5%
$806
$2,247
89.8%
Wyoming
273,350
35,280
12.9%
$77
$2,170
89.4%
Other Areas
785,930
20,650
2.6%
$44
$2,114
95.7%
Source: Congressional Research Service, based on data from the Internal Revenue Service, Statistics of Income,
SOI Tax Stats- Historic Table 2, (Total File, Al States) at https://www.irs.gov/statistics/soi-tax-stats-historic-table- at https://www.irs.gov/statistics/soi-tax-stats-historic-table-
2. 2.
Note: Totals in this table differ slightly from Totals in this table differ slightly from
totaltotals shown in shown in
Table A-2. Although the figures Although the figures
inin Table A-2 and and
Table A-3 are both based on data fromare both based on data from
the IRS, the data inthe IRS, the data in
Table A-3 include “substitutes for returns” in which include “substitutes for returns” in which
the IRS constructs tax returns for certain nonfilers.the IRS constructs tax returns for certain nonfilers.
“Other Areas”“Other Areas”
includes, for example, returns filed from includes, for example, returns filed from
ArmyArmy
Post Office and Fleet Post Office addressesPost Office and Fleet Post Office addresses
by membersby members
of the Armedof the Armed
Forces Forces stationed overseas;stationed overseas;
returns returns
filed by other U.S. citizens abroad; and returns filed by residentsfiled by other U.S. citizens abroad; and returns filed by residents
of Puerto Rico with income fromof Puerto Rico with income from
sources sources
outside Puerto Rico or with incomeoutside Puerto Rico or with income
earned as U.S.earned as U.S.
government employees. government employees.
a. The refunded amount is the part of the refundable portion of the credit that remainsa. The refunded amount is the part of the refundable portion of the credit that remains
after the credit has after the credit has
offset other taxes like
offset other taxes like
self-employmentself-employment
taxes and unpaid Social Security and Medicare payrol taxes taxes and unpaid Social Security and Medicare payrol taxes
col ected on the federal incomecol ected on the federal income
tax return (i.e.,tax return (i.e.,
Form 1040).
Congressional Research Service
31
Form 1040).
Table A-4. EITC Participation Rates by State, 2009-2016
Participation rate
State2019
Participation Rate
State
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Alabama
Alabama
79
79
.1%
78.6%
78.5%
79.8% .8%
82.0%
82.0%
82.1%
82.1%
81.9%
81.9%
82.1%
82.1%
81.0%
81.0%
79.9%
79.9%
82.1%
82.1%
Alaska
Alaska
70.0%
70.0%
73.3%
71.9% 71.9%
72.8%
72.8%
76.7%
76.7%
78.5%
78.5%
75.6%
75.6%
81.2%
81.2%
76.2%
76.2%
71.0%
71.0%
Arizona
Arizona
80.1%
76.4%
76.5%
76.7% 76.7%
76.5%
76.5%
77.4%
77.4%
77.0%
77.0%
76.6%
76.6%
75.7%
75.7%
74.5%
74.5%
76.9%
76.9%
Congressional Research Service
26
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Participation rate
State
2016
2015
2014
2013
2012
2011
2010
2009
ArkansasArkansas
81.2%
78.1%
79.5%
80.0%
80.0%
80.0%
80.0%
80.6%
80.6%
81.6%
81.6%
81.6%
81.6%
80.8%
80.8%
80.9%
80.9%
81.7%
81.7%
California
California
74.5%
73.4%
73.0%
73.8% 73.8%
74.7%
74.7%
75.8%
75.8%
75.4%
75.4%
74.3%
74.3%
73.1%
73.1%
71.0%
71.0%
78.6%
78.6%
Colorado
Colorado
76.1%
73.5%
73.3%
74.5% 74.5%
73.8%
73.8%
74.5%
74.5%
73.9%
73.9%
73.5%
73.5%
74.9%
74.9%
71.6%
71.6%
75.5%
75.5%
Connecticut
Connecticut
82.1%
77.9%
78.2%
78.6% 78.6%
79.2%
79.2%
78.6%
78.6%
78.9%
78.9%
81.3%
81.3%
77.7%
77.7%
77.1%
77.1%
79.6%
79.6%
Delaware
Delaware
81.4%
80.4%
78.5%
74.0% 74.0%
78.5%
78.5%
79.4%
79.4%
82.3%
82.3%
82.0%
82.0%
83.6%
83.6%
77.9%
77.9%
79.8%
79.8%
District
District
of Columbia of Columbia
75.4%
75.5%
77.3%
71.0% 71.0%
82.0%
82.0%
71.9%
71.9%
72.2%
72.2%
75.2%
75.2%
76.1%
76.1%
74.0%
74.0%
75.0%
75.0%
Florida
Florida
82.4%
81.4%
81.3%
81.7% 81.7%
82.0%
82.0%
82.1%
82.1%
83.4%
83.4%
82.8%
82.8%
82.6%
82.6%
81.0%
81.0%
81.0%
81.0%
Georgia
Georgia
79
79
.1%
77.3%
78.0%
79.9% .9%
80.9%
80.9%
81.2%
81.2%
80.8%
80.8%
80.8%
80.8%
79.1%
79.1%
79.0%
79.0%
81.2%
81.2%
Hawai Hawaii
83.6%
77.8%
77.8%
81.7%
81.7%
80.9%
80.9%
82.5%
82.5%
84.9%
84.9%
80.2%
80.2%
79.9%
79.9%
81.1%
81.1%
81.8%
81.8%
Idaho
Idaho
81.5%
79.0%
78.5%
78.5% 78.5%
78.5%
78.5%
81.2%
81.2%
80.1%
80.1%
83.2%
83.2%
78.3%
78.3%
83.2%
83.2%
80.1%
80.1%
Il inois
Il inois
77.6%
78.4%
78.2%
78.5% 78.5%
78.3%
78.3%
79.0%
79.0%
79.2%
79.2%
78.5%
78.5%
77.5%
77.5%
77.7%
77.7%
81.5%
81.5%
Indiana
Indiana
80.6%
80.3%
79.8%
79.5% 79.5%
81.8%
81.8%
80.5%
80.5%
82.8%
82.8%
80.7%
80.7%
80.7%
80.7%
81.0%
81.0%
83.0%
83.0%
Iowa
Iowa
81.1%
75.5%
76.9%
79.3% 79.3%
78.7%
78.7%
79.2%
79.2%
79.6%
79.6%
79.1%
79.1%
78.7%
78.7%
79.3%
79.3%
80.8%
80.8%
Kansas
Kansas
78.3%
78.0%
76.0%
74.9% 74.9%
77.3%
77.3%
77.1%
77.1%
79.8%
79.8%
78.3%
78.3%
79.2%
79.2%
78.2%
78.2%
78.0%
78.0%
Kentucky
Kentucky
82.1%
79.9%
80.1%
81.5% 81.5%
82.0%
82.0%
80.5%
80.5%
81.1%
81.1%
82.7%
82.7%
81.9%
81.9%
79.6%
79.6%
81.4%
81.4%
Louisiana
Louisiana
80.
80.
9%
78.2%
77.7%
80.4% 4%
79.2%
79.2%
80.2%
80.2%
80.5%
80.5%
81.7%
81.7%
81.4%
81.4%
80.0%
80.0%
80.4%
80.4%
Maine
Maine
81.6%
81.7%
75.4%
77.9% 77.9%
79.5%
79.5%
81.0%
81.0%
77.9%
77.9%
81.5%
81.5%
80.4%
80.4%
79.3%
79.3%
81.4%
81.4%
Maryland
Maryland
76.0%
75.6%
74.1%
78.3% 78.3%
78.8%
78.8%
77.6%
77.6%
78.7%
78.7%
78.3%
78.3%
79.4%
79.4%
76.4%
76.4%
80.0%
80.0%
Massachusetts
Massachusetts
80.2%
78.3%
78.1%
79.4% 79.4%
80.8%
80.8%
80.0%
80.0%
79.8%
79.8%
79.7%
79.7%
78.1%
78.1%
77.0%
77.0%
78.0%
78.0%
MichiganCRS-32
Participation Rate
State
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Michigan
80.5%
80.5%
80.4%
80.4%
80.4%
80.9%
80.9%
80.9%
80.9%
82.0%
82.0%
81.6%
81.6%
81.9%
81.9%
80.4%
80.4%
81.0%
81.0%
Minnesota
Minnesota
81.5%
78.4%
78.3%
78.9% 78.9%
78.9%
78.9%
78.7%
78.7%
80.6%
80.6%
79.7%
79.7%
79.4%
79.4%
78.0%
78.0%
79.3%
79.3%
Mississippi
Mississippi
82
82
.6%
79.6%
80.5%
82.4% .4%
84.8%
84.8%
84.1%
84.1%
84.7%
84.7%
84.5%
84.5%
84.3%
84.3%
85.2%
85.2%
83.1%
83.1%
Missouri
Missouri
78
78
.9%
78.2%
78.5%
78.4% .4%
80.7%
80.7%
80.3%
80.3%
80.0%
80.0%
80.9%
80.9%
81.0%
81.0%
79.9%
79.9%
80.2%
80.2%
Montana
Montana
81.6%
77.7%
77.1%
78.7% 78.7%
77.4%
77.4%
76.0%
76.0%
76.5%
76.5%
78.4%
78.4%
80.3%
80.3%
77.3%
77.3%
74.6%
74.6%
Nebraska
Nebraska
81.4%
80.7%
77.6%
82.4% 82.4%
76.9%
76.9%
79.9%
79.9%
78.1%
78.1%
80.2%
80.2%
77.6%
77.6%
79.0%
79.0%
83.3%
83.3%
Nevada
Nevada
76.4%
74.7%
74.8%
74.6% 74.6%
75.3%
75.3%
76.3%
76.3%
75.4%
75.4%
73.7%
73.7%
73.6%
73.6%
71.5%
71.5%
76.9%
76.9%
New Hampshire
New Hampshire
78.5%
81.8%
74.3%
74.6% 74.6%
80.6%
80.6%
78.4%
78.4%
79.9%
79.9%
79.3%
79.3%
81.5%
81.5%
77.4%
77.4%
80.3%
80.3%
New Jersey
New Jersey
79.8%
78.1%
76.9%
77.5% 77.5%
78.8%
78.8%
78.6%
78.6%
77.2%
77.2%
79.1%
79.1%
77.8%
77.8%
75.7%
75.7%
79.7%
79.7%
New Mexico
New Mexico
80.1%
78.5%
78.7%
78.2% 78.2%
75.3%
75.3%
80.8%
80.8%
82.1%
82.1%
81.1%
81.1%
81.8%
81.8%
75.7%
75.7%
81.4%
81.4%
New York
New York
81
81
.4%
82.5%
81.4%
81.7% .7%
82.5%
82.5%
82.4%
82.4%
82.9%
82.9%
82.8%
82.8%
82.5%
82.5%
79.7%
79.7%
82.6%
82.6%
North Carolina
North Carolina
79
79
.3%
77.7%
76.7%
79.9% .9%
80.2%
80.2%
80.0%
80.0%
81.0%
81.0%
81.0%
81.0%
77.2%
77.2%
76.9%
76.9%
79.9%
79.9%
North Dakota
North Dakota
77.2%
82.5%
77.3%
78.2% 78.2%
82.9%
82.9%
83.0%
83.0%
80.4%
80.4%
76.1%
76.1%
82.4%
82.4%
82.3%
82.3%
80.4%
80.4%
Ohio
Ohio
81
81
.0%
79.9%
80.1%
81.3% .3%
82.3%
82.3%
82.6%
82.6%
82.0%
82.0%
81.6%
81.6%
82.5%
82.5%
81.4%
81.4%
82.0%
82.0%
Oklahoma
Oklahoma
77.9%
76.1%
75.4%
74.2% 74.2%
76.7%
76.7%
76.1%
76.1%
77.5%
77.5%
78.1%
78.1%
78.4%
78.4%
75.8%
75.8%
78.2%
78.2%
Oregon
Oregon
79.6%
73.2%
73.1%
73.4% 73.4%
75.5%
75.5%
72.5%
72.5%
74.4%
74.4%
73.4%
73.4%
72.6%
72.6%
71.0%
71.0%
74.7%
74.7%
Pennsylvania
Pennsylvania
81.8%
80.3%
81.8%
80.9% 80.9%
82.4%
82.4%
82.0%
82.0%
82.6%
82.6%
82.2%
82.2%
81.7%
81.7%
81.9%
81.9%
81.7%
81.7%
Congressional Research Service
27
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Participation rate
State
2016
2015
2014
2013
2012
2011
2010
2009
Rhode IslandRhode Island
84.0%
79.2%
82.3%
85.8%
85.8%
84.3%
84.3%
82.8%
82.8%
81.3%
81.3%
81.2%
81.2%
84.9%
84.9%
81.0%
81.0%
83.1%
83.1%
South Carolina
South Carolina
77.7%
80.2%
77.4%
78.4% 78.4%
79.6%
79.6%
80.9%
80.9%
81.9%
81.9%
84.5%
84.5%
82.0%
82.0%
80.3%
80.3%
81.1%
81.1%
South Dakota
South Dakota
82
82
.2%
82.7%
81.5%
82.8% .8%
77.2%
77.2%
82.5%
82.5%
84.6%
84.6%
81.1%
81.1%
83.0%
83.0%
84.2%
84.2%
77.8%
77.8%
Tennessee
Tennessee
79.2%
80.4%
80.4%
81.4% 81.4%
81.8%
81.8%
80.9%
80.9%
83.2%
83.2%
83.0%
83.0%
82.0%
82.0%
80.1%
80.1%
81.2%
81.2%
Texas
Texas
79.6%
78.1%
77.8%
77.8% 77.8%
78.5%
78.5%
79.1%
79.1%
79.5%
79.5%
79.1%
79.1%
78.3%
78.3%
76.8%
76.8%
80.9%
80.9%
Utah
Utah
77.1%
75.3%
75.4%
75.0% 75.0%
74.9%
74.9%
75.2%
75.2%
76.3%
76.3%
77.3%
77.3%
75.3%
75.3%
75.0%
75.0%
78.2%
78.2%
VermontCRS-33
Participation Rate
State
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
Vermont
82.9%
78.2%
83.3%
84.0%
84.0%
80.3%
80.3%
80.7%
80.7%
81.9%
81.9%
80.6%
80.6%
79.0%
79.0%
82.9%
82.9%
82.6%
82.6%
Virginia
Virginia
78
78
.9%
78.3%
78.8%
78.7% .7%
79.5%
79.5%
80.5%
80.5%
81.1%
81.1%
80.7%
80.7%
79.8%
79.8%
79.0%
79.0%
79.5%
79.5%
Washington
Washington
74
74
.4%
73.8%
74.4%
74.8% .8%
75.3%
75.3%
76.9%
76.9%
78.0%
78.0%
76.8%
76.8%
76.4%
76.4%
73.1%
73.1%
76.5%
76.5%
West Virginia
West Virginia
81.6%
81.8%
80.4%
80.9% 80.9%
82.2%
82.2%
83.2%
83.2%
82.6%
82.6%
81.1%
81.1%
83.4%
83.4%
83.1%
83.1%
80.0%
80.0%
Wisconsin
Wisconsin
80.1%
78.0%
77.8%
79.6% 79.6%
79.1%
79.1%
80.0%
80.0%
78.8%
78.8%
78.4%
78.4%
79.9%
79.9%
78.3%
78.3%
81.7%
81.7%
Wyoming
Wyoming
75.1%
74.9%
77.8%
74.6% 74.6%
76.9%
76.9%
79.8%
79.8%
78.1%
78.1%
78.6%
78.6%
77.7%
77.7%
76.3%
76.3%
73.6%
73.6%
Source: IRS-ACS MatchIRS-ACS Match
-, Center for Administrative Center for Administrative
Records Research and Applications, U.S. Census Bureau in Records Research and Applications, U.S. Census Bureau in
col aboration with IRS.col aboration with IRS.
Data can be found at https://www.eitc.irs.gov/eitc-central/participation-rate/eitc-Data can be found at https://www.eitc.irs.gov/eitc-central/participation-rate/eitc-
participation-rate-by-states. participation-rate-by-states.
Notes: The IRS data used in these estimates The IRS data used in these estimates
are based on the year of the tax return. In other words, are based on the year of the tax return. In other words,
20162019 data data
reflect tax data from reflect tax data from
20162019 income tax returns, income tax returns,
general y generally filed in filed in
20172020. The national EITC participation rate is . The national EITC participation rate is
estimated using the Census Bureau’s Current Population Survey (CPS) and hence not directly comparable to estimated using the Census Bureau’s Current Population Survey (CPS) and hence not directly comparable to
these state estimates,these state estimates,
which are based on the Americanwhich are based on the American
Community Survey (ACS).Community Survey (ACS).
CRS-34
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
Author Information
Margot L. Crandall-Hollick Margot L. Crandall-Hollick
Conor F. Boyle
Conor F. Boyle
Acting Section Research Manager Specialist in Public Finance
Analyst in Social Policy
Analyst in Social Policy
Gene Falk
Gene Falk
Specialist in Social Policy
Specialist in Social Policy
Acknowledgments
The authors would like to thank Joseph Hughes, Research Assistant in the Government Finance and Taxation Section, for his assistance in updating this report and CRS Visual Information Specialist Jamie Hutchinson for creating the original figures in this report.
Congressional Research Service
28
The Earned Income Tax Credit (EITC): How It Works and Who Receives It
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