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Earned Income Credit (EIC)
- AN OVERVIEW -
For more information, click on the questions below:
The Earned Income Credit (EIC), also known as the Earned Income Tax Credit (EITC), is an important anti-poverty and work incentive program that is run by the federal government. The EIC is targeted to individuals and especially families who earn low to moderate wages. If a worker qualifies, the EIC will lower or eliminate any taxes owed. If a worker is not obligated to pay any taxes or if the credit is larger than any taxes owed, the worker will receive a cash payment ("refund") from the Internal Revenue Service (IRS) after filing a tax return. In such instances, the government is providing low-income workers additional money beyond what they get paid at their jobs to encourage work and to reduce poverty.
The State of Massachusetts has its own version of this program available to workers who live in the state and who receive the federal EIC. Workers who qualify for and receive the federal EIC can claim an additional 15% of the federal EIC amount on their state income tax return.
To qualify for the EIC, you must have a job, have wages below a certain level, and file a federal tax return to the IRS. There are additional rules and restrictions as well. For tax year 2008, in order to qualify for the EIC, workers with no children must have earned income below $12,880. Workers with one child must have an earned income below $33,995 to be eligible, and workers with two or more children must be below $38,646 in earned income to qualify for the EIC (Note: These limits are $3,000 higher in each category for workers filing a married joint tax return). Claiming the EIC (provided you spend the amount received) will not interfere with your eligibility to apply for and obtain such benefits as TAFDC, MassHealth, SSI, food stamps, or housing assistance. Immigrants who are legally authorized to work may also claim the EIC. After you read about the eligibility requirements you may want to complete an eligibility check provided by the Internal Revenue Service to find out if you may claim the EIC on your tax return.
Families with one or more children can receive much more EIC than single workers who do not care for any children. For tax year 2008, the maximum EIC amount a qualifying worker with one child can receive is $2,917. For two or more children under one’s care, the maximum amount is $4,824. For workers with no children, the maximum EIC amount is just $438. Of course, the EIC amount that most workers can obtain is lower than these maximum figures. Workers who are eligible for the EIC can receive an advance on their credit. This advance is not a lump sum. Rather, the payment is spread throughout the year as extra money in the worker’s paycheck.
The State of Massachusetts’ EIC is an additional 15% of the federal EIC amount that a worker is entitled to receive.
To claim (apply for) the federal EIC, a worker must file a tax return with the Internal Revenue Service, usually by April 15th. A worker will need to complete one of three forms: Form 1040EZ, Form 1040A, or Form 1040 and submit it to the IRS. Workers with one or more "qualifying" children will also need to fill out a simple one-page form called "Schedule EIC." There are multiple ways to obtain these forms, including over the Internet. Assistance in filing a tax return (and claiming the EIC) is available for free at various locations throughout the state.
To claim the Massachusetts EIC, a worker must file a state income tax return with the Massachusetts Department of Revenue.
Click on the above for answers to frequently asked questions about the EIC.
Click on the above for a list of useful web sites that provide additional information about the EIC.
This section last updated on 01/25/09
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