Earned Income Tax Credit (EITC) is designed to help low-to-moderate income working people (ndls.org). It works by reducing the amount of federal income tax owed and is refundable if the tax filers credit is larger than their tax liability. The EITC amount depends on a recipient’s income, marital status, and number of children.
EITC has been in place since 1975, and more than 25 million eligible tax filers received almost $60 billion in federal EITC in 2020. However, an estimated 20% of eligible workers do not claim their Earned Income Tax Credit (EITC) every year due to a lack of awareness on the subject.
Which states offer EITC?
Below is a list of EITC by state (Source: ietp.org). You can use the IRS’s EITC Assistant to see if you qualify.
|State||Credit Size||Fully Refundable||ITIN Inclusion||Age Enhancement||Notes|
|California||85%||X||X||X (18-24, 65+)||The maximum income limit is up to $30,000 depending on filing status and family size. EITC eligible households with at least one child under 6 will receive an additional $1,000 refundable credit.|
|Colorado||20%||X||X||X (19-24)||Colorado’s EITC will increase to 25% in 2023 and return to 20 percent starting in 2026.|
|Connecticut||30.5%||X||Increased credit to 41.5% for FY 2023 only.|
|Delaware||4.5%; 20%||partially refundable||Offers the option of either a 20 percent non-refundable EITC or a refundable credit equal to 4.5 percent of the federal credit.|
|District of Columbia||70%; 100%||X||X||Offers 70% of the federal credit for families with children in the home for tax years 2022 through 2024 (this is set to increase to 100 percent in TY 2026) and 100% of the federal credit for workers without children in the home. Provides expanded income eligibility.|
|Hawaii||20%||X||Credit will be fully refundable starting in 2023.|
|Illinois||20%||X||X||X (18-24, 65+)|
|Louisiana||5%||X||EITC increase will sunset in 2026; At that point the credit will return to 3.5% of the federal credit.|
|Maine||25%; 50%||X||X||X (18-24)||Offers 25% of the federal credit for families with children in the home and 50% of federal credit for workers without children in the home.|
|Maryland||45%; 100%||X||X||X (18-24)||Expanded EITC from 28% to 45% of federal and 100% of federal for workers without a qualifying child (capped at $530). Expansion in place until 2023.|
|Montgomery County, Maryland||100%||X||X||X (18-24)||Montgomery County will match a taxpayer’s State Refundable EIC dollar for dollar.|
|Missouri||10%||nonrefundable||Nonrefundable 10% EITC available in 2023.|
|New Jersey||40%||X||X (18-24, 65+)|
|New Mexico||20%||X||X||X (18-24)||The credit is set to increase to 25 percent of the federal credit in 2023.|
|New York||30%||X||Reduced by the amount of any household credit; 25% of EITC provided on a one-time basis to households who qualified in 2021.|
|New York City||10%; 30%||X|
|Philadelphia, Pennsylvania||See Note||X||Not a direct percentage of federal. Maximum benefit of up to $6,935.|
|South Carolina||104%||nonrefundable||Set to fully phase in to 125% by 2023.|
|Virginia||15%; 20%||partially refundable||Offers the option of either a 20 percent non-refundable EITC or a refundable credit equal to 15 percent of the federal credit.|
|Washington||See Note||X||X||Not a direct percentage of federal. Requires federal EITC eligibility then offers a flat $300/person credit maxed out at $1,200. Starting in 2023.|
|Wisconsin||34%; 11%; 4%||X||Provides a credit of 34% of the federal credit for families with 3 children; 11% for families with 2 children, 4% for families with 1 child, and no EITC for workers without children in the home.|
Employers are required to notify all employees that they may be eligible for the Federal EITC (Earned Income Tax Credit). The information provided on the reverse side of the W-2 satisfies the employers’ legal Federal notification requirement. However, employers are still legally required by the State to send a separate notice to all their employees
Below are the states that require EITC notices:
|California||Give the EITC notice to workers who receive Form W-2 or Form 1099-MISC. You must also provide employees with IRS Notice 797. The IRS Notice 797 is simply used to inform the public about the potential of an income tax return because of the EITC.|
|Illinois||Give the EITC notice to workers who receive Form W-2 or Form 1099-MISC. You must also provide employees with IRS Notice 797. The IRS Notice 797 is simply used to inform the public about the potential of an income tax return because of the EITC.|
|Louisiana||Louisiana only requires employers with 20 employees or more to send the EITC notice, and only to new employees whose anticipated wages are $47,000 or less per year. You must display the Louisiana EITC notice poster in your business.|
|Maryland||You must notify your eligible employees about the EITC by December 31. Find eligible income requirements on the Comptroller of Maryland website.|
|New Jersey||In New Jersey, you must provide the EITC notice to potentially eligible employees between January 1 and February 15 of each year. See New Jersey’s employer instructions and written notice to employees.|
|Philadelphia||Employers in the city of Philadelphia, Pennsylvania must give the EITC notice to every employee who is a Philadelphia resident.|
|Texas||You must provide an EITC notice to employees by March 1 of each year. See the Texas Comptroller website for more information.|
|Virginia||In Virginia, you must post the EITC notice poster in your business where employees can read it.|
To learn more about the Earned Income Tax Credit (EITC) head to the IRS website.