All About The EITC

income tax return formThe Earned Income Tax Credit (or the EITC), passed in 1975, is a refundable tax credit for low- and medium-income couples and individuals, designed to encourage people to work and also to reduce poverty. The tax credit was created, in part, to as an offset to Social Security taxes.

As indicated in its name, the tax credit is for earned income. The Internal Revenue Code defines earned income as that received through personal effort. Earned income excludes other sources of income such as capital gains (dividends and interest) and what are referred to as social entitlements: Social Security, unemployment, retirement income, alimony, and child support payments.

The following infographic breaks down what the EITC is and what the approximate credit amounts are based on marital status and the number of children in the household.

EITC TaxCenter infographic