Why the Earned Income Tax Credit (EITC) Matters
Millions of people are working hard and still struggle to make ends meet. Working families living in poverty need both immediate relief and support that will help increase their children’s chances to move out of poverty in the future. The Earned Income Tax Credit (EITC) puts money back into the pockets of working families to help them to reduce the impact of poverty today— so that they are able to buy groceries, pay utility bills, and buy school supplies—and also helps them begin to break the cycle of poverty for future generations by getting additional education and training, better transportation, and saving for their children’s education.
Erica Williams, Center on Budget and Policy Priorities
How does the EITC improve the lives of working families?
Don Baylor, (formerly) Urban Institute
How do families use the EITC to improve their lives?
Anita Garrett, United Way Association of South Carolina
The Earned Income Tax Credit (EITC) is a federal tax credit for people who work and have low to moderate earned incomes. The EITC reduces the amount of federal taxes owed and may also provide a refund.
Because the EITC puts money back into the pockets of low-income families, the EITC has been called one of the largest and most effective poverty-reduction programs in the nation. Each year, the federal EITC lifts millions of people out of poverty. In 2018, the EITC lifted about 5.6 million people out of poverty, including about 3 million children.
When filing taxes for 2019, working families with children with annual incomes below about $41,100 to $56,000 (depending on marital status and the number of dependent children) may be eligible for the federal EITC. Working people without dependent children who have incomes below about $15,570 ($21,370 for a married couple) can receive a very small EITC. Read more about EITC eligibility in this report from the Center on Budget and Policy Priorities.
There are now 29 states and the District of Columbia with a state EITC. Learn more about state EITCs from Center on Budget and Policy Priorities’ reports and access Tax Credits for Workers and Their Families’ state-by-state data and resources.
Research shows that the Earned Income Tax Credit (EITC) provides work, income, educational, and health benefits to its recipients and their children. Recent research indicates the income from these tax credits leads to benefits at virtually every stage of life. In addition, tax credits can be a tool to advance equity.
Read more about the impacts – including the two-generation impacts – of the EITC below:
- State Earned Income Tax Credits Help Build Opportunity for People of Color and Women, CBPP, July 2018
- The Earned Income Tax Credit: A Key Policy to Support Families Facing Wage Stagnation, University of California at Berkeley’s Institute for Research on Labor and Employment, January 2017.
- EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, CBPP, October 2015.
- Two Generation Approaches to Poverty Reduction and the EITC, EITC Funders Network, Grantmakers Income Security Taskforce (GIST), and Grantmakers for Children, Youth and Families (GCYF), Fall 2015.
To help improve the efforts to protect current and create new state EITCs, Economic Opportunity Funders (formerly known as GIST) and the EITC Funders Network administer and oversee the EITC Rapid Response, Campaign and Policy Development Fund. The three funds are guided by an advisory group, supported by two national funders and administered by EOF and the EITC Funders Network in partnership with the Center on Budget and Policy Priorities (CBPP) and The Hatcher Group.
The Tax Policy Center’s EITC Interactive Database provides users with access to IRS data on federal individual income tax filers. Data are available for all ZIP codes, cities, counties, metropolitan areas, states, state legislative districts, and congressional districts in the United States.
- The IRS site provides information on volunteer tax preparation services and EITC eligibility criteria.
- The Center on Budget and Policy Priorities provides research on the EITC as well as overviews and policy basics.
- Tax Credits for Working Families includes resources at both the national and state level related to EITC and other tax credits for working families.
Use this worksheet to begin internal conversations about adding the CTC and EITC to your list of organizational priorities. Answer the questions as a team and identify where your organization would be on the wheel.
Keep in mind, organizations can enter anywhere on the wheel based on focus areas and priorities because we need funders from each part of the ecosystem to contribute in order for the wheel to keep spinning and moving forward.
EITC Case Studies
One of the priorities of the EITC FN is to support state expansions of the Earned Income Tax Credit. These two case studies explore the pathway that New Mexico and Washington State took to make it happen for their families.