With the tax season upon us, the IRS is gearing up for over 140 million individual returns this year. However, a significant number of taxpayers might overlook a substantial benefit—the Earned Income Tax Credit (EITC), which can be quite valuable. In 2023, those who were eligible snagged an average credit of $2,743, highlighting its importance for low- to moderate-income earners.
Danny Werfel, a former commissioner of the IRS, pointed out back in January that millions of households benefit from the EITC annually. Yet, he also noted that nearly 20% of those who qualify either don’t claim it or aren’t aware that they do. It seems the issue largely boils down to a lack of information.
Shifting focus to what the upcoming year has in store, the EITC could amount to as much as $7,830 for families with three or more kids in 2024, reflecting an increase from $7,430 in 2023. For those without children, aged between 25 and 64, the credit stands at a maximum of $632 in 2024.
Now, when it comes to timing, there’s a legal stipulation that prevents the IRS from issuing EITC refunds before mid-February. Most early filers, though, will likely find updates on their status in the “Where’s My Refund?” portal by February 22nd. Assuming no issues with the returns and a direct deposit selection, refunds should land by March 3rd.
### Breaking Down the Earned Income Tax Credit
Syracuse University law professor Robert Nassau, who also heads the low-income tax clinic, acknowledges that the EITC can be quite puzzling. For 2024, if you’re earning wages from a job—this “earned income” must be $59,899 or less for singles and up to $66,819 for married couples filing together to qualify. This, of course, considers families with three or more children and adjusts for fewer children in the household.
These income boundaries revolve around your adjusted gross income, meaning your total income after taking out pre-tax contributions to plans like a 401(k), and other “adjustments,” such as certain IRA contributions, student loan interest, and teacher expenses.
Other criteria for the EITC include the following:
– Your investment income shouldn’t exceed $11,600
– You must hold U.S. citizenship or be a resident alien throughout the year
– It’s necessary to have a valid Social Security number for yourself, your spouse (if you’re filing jointly), and any qualifying children
– Filing a tax return is essential
Nassau also highlights that some eligible individuals might miss out, especially if they’re low earners not required to file. The upside? The EITC is “refundable,” meaning even without a tax liability, you could still pocket a refund.
The IRS offers an EITC assistant to check your eligibility. If you find out you qualify, you can opt to file for free using resources such as IRS Direct File, IRS Free File, and Volunteer Income Tax Assistance, among others.
