What Is the Earned Income Tax Credit (EITC)?

Tax can feel hard to follow, and the Earned Income Tax Credit is one of the parts that causes the most questions. It is a credit, not a loan, and it is not a payment from an employer. It is part of the United States tax system, and it is aimed at people who work but earn low to moderate pay. This guide explains it in simple words, and all figures are for tax year 2025, from the Internal Revenue Service, known as the IRS.

What Is the Earned Income Tax Credit in Simple Words?

The Earned Income Tax Credit, or EITC, is a US tax credit for people who work and earn low to moderate pay. It lowers the tax you owe. If the credit is larger than your tax bill, the rest can come back to you as part of your refund, because the credit is refundable.

How a Refundable Credit Works

Think of a credit as an amount taken off your tax bill. Suppose your tax bill is 500 dollars and your credit is 800 dollars. The credit first lowers your tax bill to zero. The 300 dollars left over can then come back to you as part of your refund, because the credit is refundable in general terms. The exact result will depend on your own tax return and how much tax you already paid during the year.

This is why the EITC can matter most for people with low pay. A person who owes little or no tax in a year can still benefit, if the rules for that year are met. It is not a pay rise. It is a tax credit that is claimed once a year, on a tax return, and it is based on the income and family facts for that tax year.

Who Is the EITC For?

The EITC is for workers. In general terms, you need earned income from a job or from self employment. Earned income includes wages, salaries and tips, and income from self employment. Interest and dividends, pensions and annuities, Social Security benefits, unemployment benefits, alimony and child support do not count as earned income for the EITC, according to the IRS.

Your income also has to be within the limits set by the IRS for the tax year. Those limits depend on how many qualifying children you claim and on your filing status, which is the way you file your tax return, for example as single or as married filing jointly. If your income is above the limit for your case, you do not qualify for the credit for that year, even if you have earned income.

There is also a limit on investment income. For tax year 2025, the IRS says your investment income must be 11,950 dollars or less to qualify. Investment income is income from investments, not pay for work. If your investment income is above that limit, you do not qualify for that year, even if your earned income is low.

How Children Change the Amount

Children change the amount in general terms. Workers with qualifying children can qualify for a larger maximum credit than workers without qualifying children, and the income limits are higher too. The more qualifying children you have, up to three or more, the higher the maximum credit can be. A worker without qualifying children can still qualify for a smaller credit, if the other rules are met, but that smaller credit has a much lower income limit.

A qualifying child is a child who meets the IRS rules for the EITC. Those rules cover the childs age, where the child lives, and the childs link to you. This guide does not list every rule, because the IRS pages give the full test and the EITC Assistant can help you check your own case.

Maximum Amounts and Income Limits for Tax Year 2025

The table below shows the IRS figures for tax year 2025 only. The income figures are the maximum adjusted gross income, or AGI, that you can have and still qualify. Use the column that matches your filing status.

Qualifying children	Maximum credit for tax year 2025	Maximum income, single and similar filers	Maximum income, married filing jointly
No qualifying children	$649	$19,104	$26,214
One qualifying child	$4,328	$50,434	$57,554
Two qualifying children	$7,152	$57,310	$64,430
Three or more qualifying children	$8,046	$61,555	$68,675

For tax year 2025, the investment income limit is 11,950 dollars or less. These are maximum amounts, not the amount every person will get. Most people who qualify will get less than the maximum. The exact credit depends on your exact earned income and adjusted gross income, your filing status and the number of qualifying children. The IRS tables give the exact amount for each income level, and the IRS EITC Assistant can help you check whether you qualify.

Why You Must File a Tax Return to Claim It

You must file a tax return to claim the EITC, even if your pay is below the normal filing level. The credit is not paid to you on its own during the year, and it is not sent to you just because you have a job. The IRS can only work out your claim from the facts on your return, so you need to file the return and claim the credit on it.

Some people with low pay do not file a return because they think they do not need to, since no tax is owed. If they do not file, they do not claim the EITC, and they miss the credit for that year. If you think you may qualify, filing a return is the way to find out. Keep your pay records, your W-2 forms from employers, and your self employment income records, so you can fill in the return with the right figures.

How the EITC Differs From a Deduction

A deduction and a credit sound alike, but they work in different places in the tax maths. A deduction lowers the income that tax is worked out on. A credit lowers the tax owed itself. That difference matters, because a credit is usually worth more than a deduction of the same size.

Here is a simple way to see it. A 500 dollar deduction does not cut your tax bill by 500 dollars. It cuts the income used to work out your tax by 500 dollars, so the tax saving is only a share of that amount. A 500 dollar credit, in general terms, cuts your tax bill by 500 dollars, because it is taken straight off the tax you owe.

Worked Example: An Example Worker

Example only. This is a made up example to show how the IRS figures fit together. It is not a claim about any real person, and it does not work out the exact credit for a real case.

Alex is single, has one qualifying child, and earned 20,000 dollars in wages in tax year 2025. Alex has no investment income and files a tax return. For tax year 2025, the income limit for a single filer with one qualifying child is 50,434 dollars, so Alex is within the income limit in this example. The maximum credit for one qualifying child in tax year 2025 is 4,328 dollars. Alex does not get the maximum amount in every case, because the exact credit depends on exact earned income and the other IRS rules.

Compare Alex with a worker with no qualifying children. For tax year 2025, the maximum credit with no qualifying children is 649 dollars, and the income limit for a single filer is 19,104 dollars. The limit is much lower, and the maximum credit is much smaller. That gap is the point of the table above: the number of qualifying children changes both the maximum credit and how much you can earn and still qualify.

Quick answers

Related guides

• Side Income Tax Basics
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Further reading

• Earned Income Tax Credit (EITC), Internal Revenue Service
• Earned income and Earned Income Tax Credit (EITC) tables, Internal Revenue Service

This content is educational only. It is not financial advice, and it is not tax advice.