What is the earned income tax credit?

The Earned Income Tax Credit (EITC) is a tax credit designed to help low and moderate-income working individuals and families. It reduces the amount of tax they owe and may also provide a refund if the credit is larger than the amount of taxes owed. The amount of the credit is based on the amount of earned income reported on the income tax return. In Virginia, the EITC can be equal to up to 25 percent of the federal credit, or up to $837 in 2021. To be eligible for the EITC, taxpayers must meet certain income and work requirements. To qualify, they must have earned income (such as wages, salaries, tips, and some disability payments) during the year. They must also meet the requirements for filing a tax return, be a U.S. citizen or resident alien all year, and not qualify as a dependent of another taxpayer. Additionally, the total income must be below certain limits. For the 2021 tax year, the income limit for a taxpayer with one qualifying child is $52,427; for two or more qualifying children, it increases to $57,993. The income limit for taxpayers with no children is $21,730. The EITC is a valuable tax incentive that can help many Virginia taxpayers keep more of their hard-earned money. It is important for taxpayers to understand the eligibility requirements and to apply for the EITC if they qualify.

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What is the earned income tax credit?

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