What is the earned income tax credit (EITC)?

The earned income tax credit (EITC) is designed as a refundable tax credit that benefits low to moderate-income working individuals and families. This means that eligible taxpayers can not only reduce their tax liability but also receive a cash refund if the credit exceeds the amount of taxes owed. The primary purpose of the EITC is to incentivize and reward work while providing financial assistance to those who may struggle to support themselves and their dependents.

The EITC has specific eligibility criteria based on income levels, filing status, and number of qualifying children, ensuring that it targets the intended demographic effectively. By providing significant financial support through this refundable credit, the EITC plays an important role in reducing poverty and encouraging employment among low-income earners.