State Earned Income Tax Credits


The Earned Income Tax Credit [EITC] is a tax benefit for individuals and families who earn low-to moderate incomes — mainly targeted at families with children.

It is a tax credit that may reduce the amount of taxes you owe, or provide you with a refund when the credit is larger than the tax amount owed.

The current EITC is worth up to $6,269 in refundable cash based on income level, family size and marital status.

For example, if your tax liability is only $1072 and the credit you are allowed is $5,572, you may receive a refund check for $4,500.

Those with the lowest incomes qualify for the largest credits. The credit phases out as you earn more money.

2016 EITC Income Limits + Maximum Credit Amounts

NO. of CHILDREN MAXIMUM CREDIT SINGLE MARRIED
None $506 $14,880 $20,430
1 $3,373 $39,296 $44,846
2 $5,572 $44,648 $50,198
3 or more $6,269 $47,955 $53,505

Single parents with two children under age 19 who made less than $44,648 are eligible for a refundable credit of up to $5,572. In contrast, couples with no dependent children earning less than $20,430 can receive no more than $506.

“For most of these people it’s the biggest check they are going to get all year,” IRS Commissioner, John Koskinen said in an interview with The Associated Press.


EITC PARTICIPATION BY STATE


Twenty eight [28] states and the District of Columbia, as well as New York City, offer their own version of Earned Income Tax Credits [EITCs] to complement the federal credits — applying a percentage match to the federal allocation.

South Carolina and Montana become the 27th and 28th states to enact the state-level EITC, respectively. Hawaii would soon enact a state-level EITC equal to 20% of the federal credit.

State EITCs are available only to families — particularly single mothers — that earn income through work, creating an incentive to work and allowing them to keep more of what they earn.

In addition, the “refundable” portion of the EITCs provide these families with a much needed income boost that helps meet their basic needs and pay for the very things that allow them to keep working, such as child care and transportation.


State EITC Rates


Nearly all state EITCs are modeled directly on the federal EITC — each uses federal EITC eligibility rules, however, the percentages vary greatly from state to state.1

All but one state set their credits as a percentage of the federal EITC, the exception being Minnesota which calculates its credit as a percentage of income.2

STATE Percentage of Federal Credit Refundable
California 85% up to half of the federal phase-in range Yes
Colorado 10% Yes
Connecticut 27.5% Yes
Delaware 20%
District of Columbia 40% Yes
Illinois 14% Yes
Indiana 9% Yes
Iowa 15% Yes
Kansas 17% Yes
Louisiana 3.5% Yes
Maine 5% Yes3
Maryland 26% Yes
50%
Massachusetts 23% Yes
Michigan 6% Yes
Minnesota 25% – 45% Yes
Montana 3% Yes
Nebraska 10% Yes
New Jersey 35% Yes
New Mexico 10% Yes
New York 30% Yes
Ohio 10%
Oklahoma 5%
Oregon 11% Yes
Rhode Island 15% Yes
South Carolina 125% by 2023
Vermont 32% Yes
Virginia 20%
Wisconsin 4% (one child) 11% (two children) 34% (three children) Yes
New York City * 5% Yes

In 22 states and the District of Columbia, credits are fully refundable if the amount is greater than the taxes owed. In all but five states, the EITC can only reduce you tax liability, not provide a refund.

* New York City is one of only three cities to offer its own EITC as an additional level of support at 5% of the federal EITC.


America’s Most Effective Anti-Poverty Program


The EITC is widely recognized as an effective tool for preventing low-income working families from slipping into poverty. The credit is very successful at reducing poverty, benefiting recipient parents and children, and promoting work rather than welfare.

In 2015, it lifted 6.5 million people — of which nearly half were children — out of poverty.4 In fact, the EITC has become the largest anti-poverty program in the nation.

It is, however, important to note that the EITC is used mostly as a temporary support to help families meet their basic needs while they work toward becoming self-sufficient.


The EITC and the PATH ACT


The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) mandates that the IRS not issue a refund on tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit until Feb. 15.5

The additional time allows the IRS to investigate the possibility of fraudulent claims with fabricated wages and withholdings. Thus, you’ll have to wait a little while for your EITC refund.


  1. IRS, States and Local Governments with Earned Income Tax Credit
  2. 2016 Minnesota Statutes, Section 290.0671
  3. Maine’s EITC was originally nonrefundable. It was made refundable in 2015.
  4. CBPP, States Can Adopt or Expand Earned Income Tax Credits to Build a Stronger Future Economy
  5. IRS, New Federal Tax Law May Affect Some Refunds Filed in Early 2017