Earned Income Tax Credit (EITC) is a federal refundable tax credit that supports low-income households. Depending on the number of children, you can receive up to $7,430 in 2025, even if you owe no taxes. Check EITC eligibility now below!
What is Earned Income Tax Credit (EITC)?
The Earned Income Tax Credit (EITC) is a refundable federal tax credit designed to support low-to-moderate income workers and families. Especially for those with children, the EITC provides significant financial benefits. Even if you owe no income tax, you may still receive a refund based on your earned income and family size.
EITC Benefit Amounts (2025)
- No children: up to $632
- 1 child: up to $4,118
- 2 children: up to $6,960
- 3 or more children: up to $7,430
These amounts vary depending on your annual income and filing status. As your income increases beyond a certain threshold, the credit phases out gradually.
Who Qualifies for EITC?
- You must have earned income (wages, self-employment, etc.)
- You must have a valid Social Security Number
- You must be a U.S. citizen or resident alien
- Your investment income must not exceed the IRS limit
Understanding Tax Credits, Refundable vs. Non-refundable
Before diving deeper into EITC, it’s important to understand the basics of tax credits and their types.
What is a Tax Credit?
A tax credit directly reduces the amount of tax you owe. Unlike tax deductions (which lower your taxable income), a credit is subtracted directly from your tax bill.
Example: If your tax bill is $2,000 and you have a $1,500 tax credit, your new tax bill is only $500.
Refundable Tax Credit
A refundable credit means that even if your tax liability is zero, you can still receive the full credit amount as a refund.
Example: If you owe $0 in taxes and have a $2,000 refundable credit, you will receive $2,000 as a refund.
Common Refundable Credits: Earned Income Tax Credit (EITC), a portion of the Child Tax Credit
Non-refundable Tax Credit
A non-refundable credit can reduce your tax liability to zero, but you cannot receive any excess credit as a refund.
Example: If your tax liability is $1,000 and you have a $1,500 non-refundable credit, your tax bill becomes $0, but you do not receive the extra $500.
Common Non-refundable Credits: The non-refundable portion of the Child Tax Credit
Summary Table
| Type | Reduces Tax | Refundable |
|---|---|---|
| Refundable Credit | ✅ Yes | ✅ Yes |
| Non-refundable Credit | ✅ Yes | ❌ No |
How EITC and Child Tax Credit Work Together
In 2025, families with children may also qualify for the Child Tax Credit, which provides up to $2,000 per child under age 17. Of this, $1,600 is refundable, meaning you can receive it even if you owe no tax, while the remaining $400 is non-refundable.
Real-Life Examples
Example 1: Married couple with 2 children, total income $25,000
Standard Deduction: $29,200 → Taxable Income = $0 → Tax Due: $0
EITC: $6,960, Child Tax Credit: $3,200 ($1,600 x 2) → Total Refund = $10,160
Example 2: Married couple with 2 children, total income $37,800
Taxable Income = $8,600 → Tax Due = $860
Non-refundable Child Tax Credit ($800) reduces tax liability to $60
Total refund from refundable portions = EITC + Refundable Child Credit = still
over $9,000
Don’t Forget Saver’s Tax Credit
Low-income taxpayers contributing to retirement accounts (like 401(k), IRA, or Roth IRA) may also qualify for the Saver’s Credit. You can receive up to $2,000 in additional tax credits in 2025 just for saving for retirement.
What About Social Security Tax?
Even though many low-income families don’t owe federal income tax, they still pay Social Security tax. However, the Social Security benefit formula is progressive and favors lower-income earners, meaning you get more benefits relative to your contributions.
Conclusion: File Taxes Even If You Owe None!
Even if your income is low and you owe no taxes, you should still file a federal tax return to claim EITC, Child Tax Credit, and Saver’s Credit. These refundable credits can put thousands of dollars back in your pocket.
