The Earned Income Tax Credit (EITC), a credit to low- and moderate-income workers, will be higher in tax years 2025 and 2026. The highest credit for taxpayers filing in 2025 will be $8,046, up from $7,830 for 2024. Ahead of 2026, the IRS also announced the maximum EITC will be $8,231.
Who gets the EITC?
The EITC is intended to aid workers, with additional credit tilted towards families with children. Helpful as it is, the IRS quotes that an estimated 20% of eligible taxpayers do not claim it,
The credit range is determined by income and by the number of qualifying children:
- No qualifying children: Single filers with incomes of $19,104 or less, or married couples filing jointly with incomes of $26,214 or less, can receive a maximum credit of $649.
- One qualifying child: Single filers with incomes of $50,434 or less, or married couples filing jointly with incomes of $57,554 or less, can receive up to $4,328.
- Two qualifying children: Single filers with incomes up to $57,310, or married couples filing jointly with incomes up to $64,430, can get up to $7,152.
- Three or more qualifying children: Single filers with incomes up to $61,555, or married couples filing jointly with incomes up to $68,675, can get the maximum $8,046 for 2025.
How the EITC works
The EITC is a refundable credit, which means it will reduce your tax bill and can even give you a refund if the credit is more than the tax you owe. If you do owe tax, the credit will reduce your liability first. Any excess is paid to you.
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What Taxes are considered earned income?
The IRS uses a broad definition of earned income and includes:
- Wages, salaries, or tips that are reported on Form W-2
- Self-employment, business, or farm income
- Gig or freelance work, such as rideshare driving, delivery work, online sales, or freelance professional services
- Ministerial or religious order member income
- Certain disability benefits and combat pay that are nontaxable
The following is not earned income:
- Work done by an individual who is an inmate in a penal institution
- Interest, dividends, pensions, annuities, Social Security, unemployment compensation, alimony, or child support
- Having tax-free combat pay will also affect your EITC, either raising or lowering your credit.
Other credits you can qualify for
Being eligible for the EITC also makes you potentially eligible for other tax credits, including:
- Child Tax Credit and Credit for Other Dependents
- Child and Dependent Care Credit
- Education Credits
These credits can also lower your tax or increase your refund.
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Takeaway
The upcoming EITC increases in 2025 and 2026 give the opportunity to eligible employees to receive larger refunds, which will allow them to retain more of their earnings for themselves and their families. Taxpayers should carefully examine their eligibility and claim the credit so that they do not miss this valuable tax benefit.
