what is earned income tax credit

The Earned Income Tax Credit (EITC) is a refundable tax credit in the United States designed to assist low- to moderate-income working individuals and couples, especially those with children. It is intended to provide a financial boost to those who are employed but have lower incomes. The amount of the credit depends on the recipients income and the number of children they have. The credit phases in slowly, has a medium-length plateau, and phases out more slowly than it was phased in. It is important to note that investment income is handled differently, and one more dollar of income can result in a sudden and complete loss of the credit. To qualify for the EITC, individuals must have worked and earned income below a certain threshold, which was $59,187 in the tax year 2022. Additionally, investment income must be below $10,300 in the same tax year. The EITC is claimed by filing a tax return, even if no tax is owed or if filing is not required. The credit is also available to low-income adults with no children. The EITC has been part of political debates in the United States over whether raising the minimum wage or increasing the EITC is a better idea.