Earned Income Tax Credit, in short EITC, is a federal program through the IRS, Internal Revenue Service.  It is a tax credit for individuals and families of the lower to middle working income class.  The original tax credit legislation was first approved back in 1975.  One reason for this was to help counterbalance social security tax burdens as well as to provide individuals with a true incentive to get out and work.

How Does It Work?

Put simply, when the Earned Income Tax Credit is more than the actual taxes owed from a working family or individual, a refund is actually given.  You have to claim the credit as well as qualify for the credit in order to receive it, though.

The actual amount you will receive is determined by a number of factors including your total income for the year as well as the number of qualified dependents that you support for at least half of the year.

New Implementations

In 2009, thanks to Obama and the American Recovery and Reinvestment Act of 2009, the EITC was adjusted to allow three children to be claimed whereas it was only two before at maximum.  Lucky for those in the lower income class with three children, you’ll get the same option for 2010.  The option will still be available for 2010 to claim a maximum for three qualifying children for the Earned Income Tax Credit.  Be sure to claim it for 2010 as it is currently scheduled to go back to maximum of two children for 2011.

Finding Out if You Are Eligible

First, you can find another article on our site giving information as to eligibility for the EITC; however, there is also an online application found on the IRS website that you can use, called the EITC Assistant.

However, your earned income for the year as well as your adjusted gross income (AGI) will need to be within pre-determined ranges.  You’ll also need to determine if your child(ren) is/are eligible to claim, which is something that you can do using the above EITC Assistant on the IRS government website.

Earned Income Tax Credit 2009 and 2010 Amounts

Just to help you understand a little bit and because the information can be hard to find sometimes, below you’ll find the amounts for the Earned Income Tax Credit for both 2009 and 2010 years.

For 2009, the maximum EITC is (which is what you should have already filed at the beginning of the 2010 year, but if have not, you need to ASAP):

• 3 or more qualifying children:  $5,657
• 2 qualifying children:  $5,028
• 1 qualifying child:  $3,043
• No qualifying children:  $457

For 2010, the maximum EITC is (which is this coming up year that you’ll file for in 2011):

• 3 or more qualifying children:  $5,666
• 2 qualifying children:  $5,036
• 1 qualifying child:  $3,050
• No qualifying children:  $457