Program objective

The baseline tax system would not allow credits for particular activities or targeted at specific groups. In contrast, the Tax Code provides an EITC to low-income workers at a maximum rate of 45 percent of income. In 2024, for a family with one qualifying child, the credit is 34 percent of the first $12,390 of earned income. The credit is 40 percent of the first $17,400 of income for a family with two qualifying children, and it is 45 percent of the first $17,400 of income for a family with three or more qualifying children. Low-income workers with no qualifying children are eligible for a 7.65 percent credit on the first $8,260 of earned income. The credit plateaus and then phases out with the greater of Adjusted Gross Income or earnings at income levels and rates which depend upon how many qualifying children are eligible and marital status. Earned income tax credits in excess of tax liabilities are refundable to individuals. Beginning in 2018, the parameters of the EITC are indexed by the chained CPI, which results in a smaller inflation adjustment than previously.