Earned Income Tax Credit EITC

Congress created the Earned Income Tax Credit in 1975 to offset payroll taxes for low-income working parents, and expanded it in 1986, 1990, and 1993 with support from both parties. The credit rises with earnings up to a point, levels off, and then phases out, so it rewards work. Because it is refundable, families can receive it as a payment even if they owe no income tax.

About 23 million workers and families claim it each year, receiving around 60 billion dollars, mostly families with children. For the 2026 tax year the maximum is about 8,200 dollars for families with three or more children, while the credit for workers without children is small. The Internal Revenue Service runs it through tax returns, and about 30 states and D.C. add their own credit. Research has found it raises employment among single mothers and lifts millions of people above the poverty line.

About one in five eligible people do not claim it, and the IRS estimates that roughly a quarter to a third of payments are made in error, largely because rules on which children qualify are complex. Proposals include simplifying eligibility, expanding the credit for workers without children, as was done temporarily in 2021, and tightening enforcement. The separate child tax credit, raised to 2,200 dollars per child by the 2025 budget law, also supports families through the tax code.