The earned income tax credit, or EITC, is a form of tax credit offered by the Federal government for people with low-income wages. The EITC is a refundable tax credit that was made by Congress in 1975 in order to reduce the tax burned on workers who fall within the low to moderate income group. This tax credit aims to increase the income of working people.

Who Are Eligible?

Individuals or families that qualify for Earned Income Tax Credit include people who accept wages falling under a certain level. For married couples, at least one spouse should have a job. In both cases, it is required that individuals who claim for EITC should file a tax return to the Internal Revenue Service.

The range of wages for those qualified for availing of EITC may change from year to year. For 2008, employees with no dependents should have an earned annual income below US$12,880 in order to qualify. For workers in families with one child, the earned income should be below US$33,995 in order to qualify. Employees caring for more than one child can be eligible if they earn below US$38,646.

Tax Credit Amount

The amount of tax credit that a worker would receive depends on his or her status. Single workers would usually receive lesser EITC than those workers with families or care for a child. But there are limits set by the IRS as to the amount that eligible taxpayers will receive.

For workers caring for one child, the IRS sets the maximum amount of US$2,917 for 2008. For workers caring for two or more children, the maximum amount of EITC would be US$4,824. For those eligible workers who are single and with no children to care for the maximum tax credit stands at US$438.

Other Information

The EITC is meant to help low income workers gain additional funds to use for their subsistence. The said tax credit is meant to be spent and should not be used for investments. Taxpayers claiming for EITC eligibility would not in any way affect their eligibility for other related benefits such as Medicaid, subsidized housing assistance and the like.

In order to claim the EITC, employees who qualify will need to file a tax return with the IRS and will need to complete the appropriate Form 1040 for submission. For workers caring for one or more children, a Schedule EIC form would also be required for completion.