Earned Income Tax Credit (EITC)
Get Up To $8,000 Back On Your Taxes!
What is Earned Income Tax Credit (EITC)?
The Earned Income Tax Credit, EITC or EIC, is a refundable tax credit for qualified workers with low to moderate-income. There are Federal EITC (EITC) and California EITC (Cal EITC), their income limits, eligibilities, and credit amounts are different.
Those who qualify for EITC and/or Cal EITC and claim the credits could pay less in taxes or even get a tax refund. The qualifying amount is based on the income, filing status, and the number of qualifying children or dependents in the tax year. People without qualifying children or dependents may also qualify for EITC and/or Cal EITC.
Do I Qualify for EITC?
To qualify for EITC, you must have earned income at least $1 from working for someone, self-employment, or running a business or farm in the tax year and meet basic requirements. Married taxpayers must file jointly to qualify for this benefit. Even you have no dependent, if you (and your spouse if filing a joint return) meet the basic EITC rules, you may qualify for the EITC.
How can I claim EITC?
You must file a federal tax return in order to claim EITC and a State tax return to claim Cal EITC. Even if you do not owe any tax or are not required to file taxes, you must file your tax return and claim EITC in order to ask for an EITC tax refund. Learn more about how to claim EITC, please visit the IRS site.
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California Earned Income Tax Credit (Cal EITC)
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If you have a low income and work, you may qualify for the California Earned Income Tax Credit (Cal EITC). This state credit gives you a refund or reduces your tax owed based on your earned income in the tax year and the number of qualifying child or dependent. The qualified taxpayers can receive up to $3,027 from the CalEITC for the 2020 tax year.
CalEITC has increased the income limits to $30,000 for working families. Young adults 18-24 and working adults over 65, and self-employed individuals are also eligible for this credit. More Californians will be able to claim this credit than ever before.
Governor Gavin Newsom signed legislation AB 1876 to extend California Earned Income Tax Credit (CalEITC) to all qualified non-resident workers who file taxes with an Individual Taxpayer Identification Number (ITIN) and Social Security Number (SSN).
ITIN filers don’t need to provide supporting identification information to file tax returns and claim CalEITC/YCTC. SSN can now be used to qualify for California Earned Income Tax Credit (CalEITC) regardless of whether it was issued for employment or receiving federally funded benefits.
California provides the Golden State Stimulus Payment of $600 or $1,200 to all taxpayers who receive Cal EITC and/or file taxes with an ITIN on the 2020 tax return. For more details, please visit the CA FTB website.
What is Young Child Tax Credit (YCTC)?
The Young Child Tax Credit (YCTC) was introduced in the tax year 2019. If you qualify for CalEITC and have a child under the age of 6 as of the end of the tax year, you may qualify for an additional $1,000 through this credit.
Together, these state credits can put hundreds or even thousands of dollars in your pocket.
Cal EITC and YCTC
Filing your state tax return is required to claim both Cal EITC and YCTC credits. For more specific information about the California Earned Income Tax Credit (Cal EITC) and Young Child Tax Credit (YCTC), visit the Cal FTB website for more info.
Free Tax Preparation Service
If you’re 60 years old or above, you can use Tax Counseling for the Elderly (TCE) at no cost.
You can also use Free Self Preparation Service to file your tax return.
Facts about the EITC and Cal EITC
The Earn Income Tax Credit (EITC) was enacted during the Ford administration by the Tax Reduction Act of 1975 and became a permanent refundable tax credit program. It was later substantially expanded by President Reagan, who often quoted it as “The best anti–poverty, the best pro–family, the best job creation measure to come out of Congress”. The EITC is one of the largest anti-poverty tax credit programs in the United States.
In 2015, California enacted the California Earned Income Tax Credit (Cal EITC). In 2020, Governor Gavin Newsom has expanded CalEITC to further assist families facing poverty. California has more than doubled the investment in CalEITC to $1 billion, which is estimated to increase the number of participating households from 2 million to 3 million.
CalEITC is a supplemental boost to the Federal Earned Income Tax Credit (EITC). A family of 3 could see their income double with Cal EITC and new Young Child Tax Credit together with federal credits, more than $8,000. However, very few people who were likely eligible for the Cal EITC had heard about this tax credit program – only 17%.
Research suggests the EITC and Cal EITC credits leads to long-term positive outcomes in health, financial stability, and education for working families. EITC and Cal EITC certainly help improve our local economy.
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