Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a tax credit that subsidizes work for low-income families. The EITC is the nation’s largest cash or near cash assistance program after the Supplemental Nutritional Assistance Program (SNAP). Together with the Child Tax Credit, the EITC lifted 10.6 million people above the poverty line and made poverty less severe for 17.5 million others in 2018, according to the Center on Budget and Policy Priorities.

The amount of EITC depends on a family’s earnings, marital status, and number of children. Workers receive the credit beginning with their first dollar of earned income; the amount of the credit rises with earned income until it reaches a maximum level and then phases out at higher income levels. The maximum credit in 2026 is $7,316 for a family with two children.  The federal 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 or no income tax. 

Oklahoma is one of 30 states (including DC) with a state EITC.  Oklahoma’s refundable EITC, set at 5 percent of the federal credit, is among the smallest of these 30 states. In 2016, the Oklahoma Legislature made the credit non-refundable in response to a budget shortfall. In 2021, the Legislature reversed this decision and restored refundability of the credit; however, the state credit was pegged permanently to 5 percent of the federal credit as of 2020 rather than rising annually in conjunction with the federal credit. The state EITC was claimed on 321,693 returns for $40.2 million in 2022, according to Oklahoma Tax Commission records. The average credit in 2022 was $125, compared to just $42 in 2020, prior to the credit’s refundability being restored.