The earned income tax credit (EITC) is a valuable tax credit that many taxpayers normally miss.
Historically, 1 in 5 eligible Americans don’t claim the EITC, prompting the Internal Revenue Service to hold an EITC Awareness Day each year — this year on Jan. 26.
To qualify for EITC, you must be between 25 and 64 years old and have earned income within certain limits. The amount of your credit also depends on the number of kids you have and your filing status.
The maximum available amount of the credit increased this year because the EITC has been adjusted for inflation.
“Inflation erodes the value of a fixed credit amount each year, so EITC amounts are adjusted for inflation so the real value of the credit does not go down over time,” Garrett Watson, senior policy analyst at the Tax Foundation, told Yahoo Finance. “If the EITC was not indexed from 2020 until now, the value would be over 20 percent less today in real terms than it was back in 2020 — meaning working households who earn the credit would be receiving less in real terms than they were years ago.”
Read more: What is the earned income tax credit, and do you qualify?
The credit primarily helps low- and moderate-income families, but it’s possible for taxpayers with no children to qualify. The maximum credit for eligible taxpayers with no children is $600, up from $500 last year.
What is considered earned income?
Earned income is wages, salary, tips, self-employment, and work from your side hustle or gig — like temporary work, working as a driver for a ride-share or delivery service, or selling merchandise online. For those in the military, nontaxable combat pay is considered earned income.
Money received from unemployment benefits, alimony, child support, Social Security, pensions, or annuities is not considered earned income.
If your marital status changed during the year, or if you’re a member of the armed forces, disabled, living in a rural area, a grandparent raising a grandchild, disabled, or Native American, you may be eligible for this credit.
If you aren’t sure whether you qualify for EITC, use the IRS’s EITC Assistant tool.
Delayed refund for EITC
Typically, your tax refund is the total of all the credits and deductions you qualify for minus the taxes you owe. If your refund is partially based on the EITC or the additional child tax credit (ACTC), the IRS cannot issue your tax refund before mid-February — even if your refund includes other credits not related to EITC.
The IRS estimates most EITC filers will see their refunds by Feb. 27 if there are no issues with their returns and if they chose direct deposit.
Taxpayers should electronically file and use direct deposit for refunds to prevent delays.
Free file options
If you’re eligible for EITC, you may qualify for free electronic tax-filing services through IRS partners for taxpayers with an Adjusted Gross Income (AGI) of $79,000 or less in 2023.
If you made $60,000 or less last year, you can receive free tax preparation at the Volunteer Income Tax Assistance (VITA).
VITA offers free tax preparation for moderate- to low-income individuals, disabled, senior citizens, or those who have a language barrier.
Full coverage: Taxes 2024 — Everything you need to file your taxes on time
Ronda is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government. Follow her on X @writesronda
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