A helpful tax credit for middle- to low-income earners: the EITC

Financial Tips

Every year, millions of Americans get a financial boost for their federal return with the Earned Income Tax Credit, also known as the “earned income credit” or the EITC. It’s designed to reduce the income tax burden of middle- to lower-income earners with substantial credits. How much? The maximum amount for 2023 is $7,430[1] and the average credit in 2022 was $2,411[1]. Plus, if your tax credit is more than what you owe on your federal tax return, it can turn into a refund. 

Find a larger tax credit based on your income and family situation

Claiming your earned income credit depends on criteria such as how much you made last year, whether you’re filing as an individual or jointly with your spouse, as well as how many children you can claim as dependents. As with many tax credits, the IRS has a list of variables to determine the final numbers, but you can use the basic list[2] below to get an idea of your potential numbers (all information is for the 2023 tax year).

  • If you earned $56,838 in income ($63,398 filing jointly) with 3 or more children, your maximum credit is $7,430.
  • If you earned $52,918 in income ($59,478 if filing jointly) with 2 children, your maximum 2023 credit is $6,604.
  • If you earned $46,560 in income ($53,120 if filing jointly) with 1 child, your maximum credit is $3,995.
  • If you earned $17,640 in income ($24,210 if filing jointly) with no children, your maximum credit is $600.

Get a free, personalized tax credit estimate

The ETIC Assistant from the IRS can help you get a customized look at how much you can expect. It guides users through all the questions in a simple, step-by-step process. Before you begin, you’ll need earned income documents such as a W-2 or 1099, your Social Security number (SSN) and the SSNs of children you’ll claim as dependents. The EITC Assistant is NOT the same as properly filing your federal income taxes, but it can help reduce your worry and provide peace of mind when preparing this year’s return.

Tax credits for Nebraska, Minnesota and Iowa

States like Nebraska, Minnesota and Iowa also offer similar income tax credits as a percentage of your federal benefits. Currently, Nebraska offers 10%, Minnesota ranges from 25 to 45% and Iowa provides 15%[3].

You’ve worked hard to earn it, so don’t miss out

Every year, millions of Americans qualify for EITC benefits for the first time. Even so, 1 in 5 (20%) of qualified individuals and families never claim their benefits[1]. Individuals most likely to qualify include:

  • Those with a change in:
    • Marital status
    • Parental status
    • Financial status
  • People without children
  • People with limited English skills
  • Some veterans
  • People living in non-traditional homes

The IRS hopes to reduce this stat and WANTS more people to claim the dollars they’ve earned. If you’ve never filed before, this article has all the EITC links you’ll need to get started.

We’ve only scratched the surface.

Right now, you probably have more questions about eligibility and if there are considerations for specific family situations. The detailed answers you’re looking for are on the Earned Income Tax Credit web pages from the IRS. We’ve toured the pages ourselves and you’ll be able to find examples of income that counts toward your EITC, determine when you can expect a refund check, find links to more tax credits, and learn where to find free tax advice and help.

Make the most out of every tax credit opportunity.

You may qualify for more than one credit, and we whole-heartedly encourage you to explore your options. Every potential refund can make a big difference for paying an immediate expense, making purchase plans, or adding more cushion to a savings account.

Finally, tax returns need to be filed by April 15. It’s always a good idea to start early, avoid feeling rushed and schedule enough hours to file on time.

Sources:

  1. Internal Revenue Service. EITC Fast Facts. Accessed 1-31-2024.
  2. Internal Revenue Service. Earned Income Tax Credit Tables. Accessed 1-31-2024.
  3. Internal Revenue Service. State and Local Governments with Earned Income Tax Credit. Accessed 1-31-2024.

Articles contained in our news section are not intended to provide recommendations or specific advice. American National Bank and its employees do not provide tax, legal or accounting advice. Information presented on these webpages is not intended to provide, and should not be relied on for tax, legal and accounting advice.  You should consult your own tax, legal and accounting advisors before engaging in any financial transaction. Once published, articles are not updated; information could be outdated.