Earned Income Tax Credit, What's That?
The Earned Income Tax Credit (EITC) is a tax credit that subsidizes work for low-income families. The EITC the nation’s largest cash or near cash assistance program after the Supplemental Nutritional Assistance Program (SNAP). In 2015, the EITC lifted about 6.5 million people out of poverty, including about 3.3 million children, according to the Center for Budget and Policy Priorities. In 2017, the maximum credit for families with one child was $3,400, while the maximum credit for families with three or more children was $6,318
The amount of EITC depends on a family’s earnings and number of children; the maximum credit in 2016 was roughly $5,600 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 335,749 returns for $41.4 million in 2014, according to Oklahoma Tax Commission records. In 2016, the Oklahoma Legislature made the credit non-refundable.