Why is there earned income credit

Federal government websites always use a. Toggle navigation. Browse by Agency. Browse by Category. Other Resources. About Us. Help Center. Privacy and Terms of Use. Video Guides. Quick Info. EITC is a tax credit for workers with low to moderate income. Program Contact Managing Agency U. Department of the Treasury. Check if you may be eligible for this benefit. Expand Quick Info Section. Financial Assistance. To qualify for EITC you: Must have a Social Security number that is valid for employment Must have earned income from wages or running a business or a farm May have some investment income Generally must be a U.

If you do not have a qualifying child, you can use the Form EZ. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Understanding Tax Breaks. Tax Credits. Tax Deductions. Tax Deductions for Real Estate. Tax Deductions for Retirement Savings. Table of Contents Expand. What Is the Earned-Income Credit?

Understanding the EIC. Example of the EIC. Qualifying for the EIC. Key Takeaways The earned-income credit EIC is a refundable tax credit used to supplement the wages of low-income workers and help offset the effect of Social Security taxes. To be eligible for the EIC, a taxpayer must have accrued earnings during the tax year. However, investment income cannot have surpassed a specified level. Article Sources. Investopedia requires writers to use primary sources to support their work.

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Eissa, Nada, and Jeffrey B. Executive Office of the President and Department of the Treasury. Kleven, Henrik. Revised, first issued October Maag, Elaine and Nikhita Airi. Maag, Elaine. Marr, Chuck. Meyer, Bruce D. Schanzenbach, Diane Whitmore, and Michael R. Sherlock, Molly F. Crandall-Hollick, and Jane G. Washington, DC: Library of Congress. Short, Kathleen.

Treasury Inspector General for Tax Administration. Washington, DC: Department of the Treasury. Skip to main content. Tax System. Briefing Book Taxes and the Family What is the earned income tax credit? How does the federal government spend its money?

What is the breakdown of revenues among federal, state, and local governments? How do US taxes compare internationally? Federal Budget Process How does the federal budget process work? What is the history of the federal budget process? What is the schedule for the federal budget process? What is reconciliation? How is a budget resolution enforced?

What are rescissions? Federal Budget Outlook How accurate are long-run budget projections? What have budget trends been over the short and long term? How much spending is uncontrollable? What are tax extenders? What options would increase federal revenues? What does it mean for a government program to be off-budget? How did the TCJA affect the federal budget outlook? Taxes and the Economy How do taxes affect the economy in the short run?

How do taxes affect the economy in the long run? What are dynamic scoring and dynamic analysis? Do tax cuts pay for themselves? On what do economists agree and disagree about the effects of taxes on economic growth? What are the economic effects of the Tax Cuts and Jobs Act? Economic Stimulus What is the role of monetary policy in alleviating economic downturns? What are automatic stabilizers and how do they work? What characteristics make fiscal stimulus most effective?

Distribution of Tax Burdens How are federal taxes distributed? Are federal taxes progressive? How should progressivity be measured? What is the difference between marginal and average tax rates? What criticisms are levied against standard distributional analysis?

How should distributional tables be interpreted? Who bears the burden of the corporate income tax? Who bears the burden of federal excise taxes? How do financing methods affect the distributional analyses of tax cuts?

How do taxes affect income inequality? Tax Expenditures What are tax expenditures and how are they structured? What is the tax expenditure budget? Why are tax expenditures controversial? What are the largest tax expenditures? How did the TCJA affect tax expenditures? Tax Gap and Tax Shelters What is the tax gap? What does the IRS do and how can it be improved? What is a tax shelter?

Recent History of the Tax Code What did the —10 tax stimulus acts do? What did the American Taxpayer Relief Act of do? How did the Tax Cuts and Jobs Act change personal taxes?

How did the Tax Cuts and Jobs Act change business taxes? Key Elements of the U. What are itemized deductions and who claims them? How did the TCJA change the standard deduction and itemized deductions? What are personal exemptions? How do federal income tax rates work? What are tax credits and how do they differ from tax deductions?

How do phaseouts of tax provisions affect taxpayers? Capital Gains and Dividends How are capital gains taxed? What is the effect of a lower tax rate for capital gains? What is carried interest, and how is it taxed? How might the taxation of capital gains be improved? Who pays the AMT? How much revenue does the AMT raise? Taxes and the Family What is the child tax credit? What is the adoption tax credit? What is the earned income tax credit? Do all people eligible for the EITC participate?

How does the tax system subsidize child care expenses? What are marriage penalties and bonuses? How did the TCJA change taxes of families with children? Taxes and the Poor How does the federal tax system affect low-income households?