About Earned Income Tax Credit (EITC)
Earned Income Tax Credit is a tax benefit for people who worked full or part-time. This year there are new and expanded tax credits for low-moderate income workers.
The American Recovery and Reinvestment Tax Act of 2009 (ARRA) enacted expansions to the Earned Income Tax Credit and the Child Tax Credit. A new tier of benefits has been added to the EITC for families with three or more children. Income limits have also been increased.
NEW AND EXPANDED TAX CREDITS FOR LOW-MODERATE INCOME WORKERS
The American Recovery and Reinvestment Tax Act of 2009 (ARRA) enacted expansions to the Earned Income Tax Credit and the Child Tax Credit. A new tier of benefits has been added to the EITC for families with three or more children. Income limits have also been increased.
You may be eligible for the Earned Income Tax Credit if:
| You are: | and you earn LESS than: |
then you may qualify for a credit or refund up to: |
| A married couple w/ 3 or more qualifying children |
$48,279 | $5,657 |
| Unmarried w/ 3 or more qualifying children |
$43,279 | $5,657 |
| A married couple w/ 2 or more qualifying children |
$45,295 | $5,028 |
| Unmarried w/ 2 or more qualifying children |
$40,295 | $5,028 |
| A married couple w/ 1 qualifying children |
$40,463 | $3,043 |
| Unmarried w/ 1 qualifying child |
$35,463 | $3,043 |
| A married couple w/no qualifying children | $18,440 | $457 |
| Unmarried w/ no qualifying children |
$13,440 | $457 |
Note: Investment income must be $3,100 or less to qualify for the EITC.
The Child Tax Credit has also been modified. The income at which a worker can get the refundable Additional Child Tax Credit is reduced to $3,000 in 2009 from $8,500 in 2008. It is estimated that this change will enable the CTC to reach 2.9 million additional children and will provide another 10 million children with a larger credit than they would have received under the previous rules.
More about the EITC:
The Earned Income Tax Credit (EITC) is the largest and most effective federal aid program for the working poor. Since it is tied to earned income, it provides lower-income workers with an incentive to work. It is structured to supplement the incomes of lower-wage workers by reducing their income tax liabilities and providing tax refunds to those who qualify. Each year, the EITC raises the incomes of almost five million people above the poverty line, half of whom are children. During the 2002 tax year, approximately 20 million people claimed the EITC, surpassing Food Stamps and TANF as the most utilized social welfare program; yet, four million EITC-eligible families annually fail to file for the credit.
Hawaii statistics:
During Tax Year 2005, approximately 27,000 EITC-qualified taxpayers failed to claim the credit. Since the average EITC refund was $1,675 in 2005, approximately $45,101,050 of EITC funds were unclaimed by Hawaii taxpayers in 2005. Since most low-income taxpayers use a substantial portion of their refunds to purchase much needed goods and services for themselves and their families, local businesses are adversely affected and the State loses income in the form of general excise taxes for every unclaimed EITC dollar. Applying an economic multiplier of 5 and a general excise tax rate of 4.167%, the failure of taxpayers to file for the EITC resulted in a $9,396,804 loss of income to the State.
