Federal Earned Income Tax Credits (EITC)

If your earned income (income from a job) falls below certain levels, you may qualify for a reduction in taxes and possibly a refund. Federal, Maryland and Montgomery County tax programs offer "earned income credits". 

Will you qualify? The IRS EITC Assistant will tell you.

What is the Earned Income Credit Program?
It is a special program for low and moderate-income persons who have been employed in the last tax year. The program is administered by the Internal Revenue Service (IRS) and is a major anti-poverty initiative. It can reduce your federal taxes (possibly to zero). You may qualify for extra cash back from the IRS - a refund of more than you actually paid in taxes. Even if your earnings are so low that you did not pay taxes, you may be able to get a payment.

Who is eligible and how much might I get?
Generally, you may be eligible if you worked full or part-time and:

• you have no children and your household income was less than $12,590 (or $14,590 for married workers) during the year (payment up to $428); 
• have one child and your household income was less than $33,241 (or $35,241 for married workers) (up to $2,853); or
• have two or more children and your household income was less than $37,783 (or $39,783 for married workers) (up to $4,716).
  

For an easy-to-understand set of questions and answers to help you decide if you are eligible, look at the IRS website. You can find the complete information in IRS publication 596 (2007).

How do I get a federal Earned Income Credit?

• Workers raising children in 2007 must file either Form 1040 or 1040a and must fill out and attach Schedule EIC.  Workers with children cannot get the EIC if they file form 1040EZ or fail to attach Schedule EIC.  Married workers must file a joint return to get the EIC.
• Workers who were not raising children in 2007 can file a tax form - including the 1040EZ.  These workers write "EIC" (or the dollar amount of their credit) on the earned Income Credit line on the tax form.  They do not file Schedule EIC.
• A correct name and Social Security number must be provided for every person listed on the tax return and Schedule EIC.  If this information is incorrect or missing, the IRS will delay the refund.
• You must have a Social Security number for yourself, your spouse, and your child(ren).
• Workers don't have to calculate their own EIC. You choose, the IRS will do it for you.

Combat Pay - You can now choose to have your non taxable combat pay included as earned income for earned income credit. More on Combat Pay and taxes.

Does the EIC affect welfare benefits?
In most cases, the EIC does not affect eligibility for benefits like cash assistance ("welfare"), Medicaid, food stamps, SSI, or public or subsidized housing.

Can immigrant workers get the EIC?
Many legal immigrants can qualify for the EIC, as long as they meet the eligibility requirements.

Must I wait until the end of the year to take advantage of the Earned Income Credit?
Maybe not, there is an option called the "Advance Earned Income Tax Credit". If you have one job and do not expect to earn income (including your spouse's) above certain levels, you might qualify for an Advance Credit. This means that your employer will add a part of your anticipated tax credit to every paycheck. The IRS will refund the rest to you after you file your tax return for that year. 

How do I get the Advance Earned Income Credit?
To take advantage of this option, ask your employer for a W-5. Make sure to tell your employer if your spouse is also applying for Advance EIC.  This option may also apply to non-traditional families and there may be situations when you should not exercise this option. For some useful discussion about this see what the Center on Budget and Policy Priorities, a national nonprofit providing research and analysis on tax issues affecting low- and moderate-income persons, has to say. 

Easy-to-understand questions and answers from IRS can help you to see if you are eligible.

What is the federal Child Tax Credit?
The Child Tax Credit (CTC) is a federal tax benefit worth up to $1,000 for each dependent child under 17. The child tax credit is refundable, which means that you might be eligible to receive a refund even if you owe no income tax. The CTC is in addition to the Earned Income Credit and has different rules to qualify. 

Who is eligible for the federal additional Child Tax Credit, and how do I file for it?
You may be eligible for this credit if you earned more than $11,750 in 2007 and have one or more dependent children under age 17 at the end of the tax year. Unlike the Earned Income Tax Credit, the CTC requires a separate form - Form 8812.

Source: Maryland Legal Assistance Network and the Center on Budget and Policy Priorities Earned Income Tax Credit Project. 

Last date legal review: 01/07/08 (PLL/M.A.J.)

About this website. The Maryland State Law Library, a court-related agency of the Maryland Judiciary, sponsors this site. The website was developed (1999-2007) as part of an access to justice initiative by the Maryland Legal Assistance Network (MLAN) in collaboration with a number of legal services providers serving low and moderate income Marylanders.  In the absence of file-specific attribution or copyright, the Maryland State Law Library may hold the copyright to parts of this website. You are free to copy the information for your own use or for other non-commercial purposes with the following language “Source: Maryland's People’s Law Library – www.peoples-law.org. © Maryland State Law Library, 2007.”

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