Earned Income Tax Credit, What's That?
The Earned Income Tax Credit (EITC) is a tax credit that subsidizes work for low-income families. More than 27 million households will receive a total of $60 billion in reduced taxes and refunds in 2015, according to the Tax Policy Center, making the EITC the nation’s largest cash or near cash assistance program after the Supplemental Nutritional Assistance Program (SNAP). In 2013, the credit lifted 6.2 million people out of poverty, including over 3 million children, according to the Center for Budget and Policy Priorities.
The amount of EITC depends on a family’s earnings and number of children; the maximum credit in 2015 was roughly $5,500 for a family with two children. The EITC is refundable, which means the full amount can be claimed even if it exceeds a taxpayer’s tax liability. Refundability is critical to the success of the EITC because it allows the credit to still reward work and support families even if workers pay little income tax.
Oklahoma is one of 26 states with a state EITC, set at 5 percent of the federal credit. The state EITC was claimed on 331,854 returns for $39.1 million in 2012, according to Oklahoma Tax Commission records. Like the federal EITC and the state EITC in all but three states, Oklahoma’s EITC is refundable.