The Earned Income Tax Credit is a valuable federal income tax credit for low- to moderate-income working individuals and families, which originally had the dual purposes of lifting individuals and families out of poverty and serving as an employment incentive. For the 2025 tax year, filing status and the number of qualifying children will be subject to considerable changes in the refundable amount of the EITC. Understanding these changes may significantly enable a family to maximize its benefits.
Overview of the EITC
The EITC is a refundable tax credit designed to help working people and families with income relief based upon their earned income and family size. The credit amount varies dramatically depending upon the number of qualifying children, filing status and AGI. In 2025, the EITC will be tiered for the components of the prior sentence.
Refundable portion of the EITC
For tax year 2025, the refundable portion of the EITC will be as follows:
- No qualifying children: Maximum credit $632
- One qualifying child: Maximum credit $4,213
- Two qualifying children: Maximum credit $6,960
- Three or more qualifying children: Maximum credit $7,830.
These are a little higher than in the recent past, with an intended emphasis on helping families meet increases in the cost of living. These credits are refundable credits, so even if one owes no federal income tax, the full amount can be refunded and, in effect, be cash.
Income limits and phase-out ranges
The credit begins to phase out at certain levels of income, depending upon filing status:
- Single or head of household:
- No children: AGI less than $17,640.
- One child: AGI less than $46,560.
- Two children: AGI less than $52,918.
- Three or more children: AGI less than $56,844.
- Married filing jointly:
- No children: AGI less than 24,210.
- One child: AGI less than 53,120.
- Two children: AGI less than 59,478.
- Three or more children: AGI less than 63,404.
The phase-out begins at different income levels based on filing status. For example, for single filers with one qualifying child, the phase-out begins with an AGI of $46,560, which means starting from this income, the credit received is reduced as income increases beyond that level until it phases out.
Qualifying children criteria
Following are the criteria for claiming EITC with qualifying children:
- The child must be under age 19 at the end of the tax year or a full-time student under age 24.
- The child must live with the taxpayer for more than half of the year in the United States
- The taxpayer must have a valid Social Security number for each qualifying child.
These requirements provide that the taxpayer can only take advantage of an increase in the EITC benefit amount if the dependent qualifies.
Filing status consideration
Filing status is an important factor in terms of the EITC eligibility and credit amount. Filers have to choose a filing status with care as either Single or Head of Household filers have income limits that are generally lower than married couples filing jointly, for which it would make a big difference in eligibility for higher credit amounts. These may be received by a married couple filing jointly, but income limits are higher and a spouse must meet all the requirements for claiming dependents and earned income.
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