Taxation and the Family: What is the Earned Income Tax Credit?
The earned income tax credit (EITC) provides a subsidy for low-
income working families. The credit equals a fixed percentage of
earnings from the first dollar of earnings until the credit
reaches a maximum; both the percentage and the maximum credit
depend on the number of children in the family. The credit then
stays flat at that maximum as earnings continue to rise, but
eventually earnings reach a phase-out range. From that point the
credit falls with each additional dollar of income until it
disappears entirely (figures 1 and 2). The phaseout begins at a
higher income for married couples than for single parents. The
credit is fully refundable: any excess beyond a family’s income
tax liability is paid as a tax refund. - Families with three or
more children may receive a credit of up to $6,044 in 2013. The
maximum credit is $5,372 for families with two children, $3,250
for families with one child, and just $487 for those without
children. - In ad