The NCSL Blog

27

By Rich Williams

The Internal Revenue Service is leading a national effort to increase awareness for the earned income tax credit (EITC) building up to EITC Awareness Day on Jan. 25, 2019.

 In 2018, 25 million eligible tax-filers received about $63 billion in EITC. However, the IRS and U.S. Census Bureau estimate this number only represents 80 percent of those who are EITC eligible—highlighting the need for increased awareness. As part of EITC Awareness Day, the IRS creates ready-made resources for use by interested stakeholders to share with their social networks. 

The federal EITC is a refundable tax credit that supports low- and middle-income families. To qualify, you must earn income and file a tax return. The exact value of the credit depends mostly on your income level and number of children. For a complete list of requirements, see IRS Publication 596.

Adding to the federal credit, 29 states, Washington D.C., Guam and Puerto Rico have created their own EITCs to benefit tax-filers.

During 2018 sessions, legislatures were busy as eight states enacted laws addressing their state EITC. For example, California and Maryland expanded the definition of EITC “eligible individuals” to workers without children who are between the ages of 18 and 24 or older than 65—making their state EITCs more inclusive than the federal credit.

In addition, Louisiana, Maryland, New Jersey and Vermont increased the value of their EITC. Wisconsin uniquely created a two-year pilot program where EITC claimants receive the credit in monthly installments rather than as a lump sum at tax time. The inspiration for the pilot came from the success of a similar project in Chicago, where 90 percent of the 229 participants reported a preference for the periodic payments.

The participants also reported experiencing less stress meeting monthly expenses and making additional efforts to keep a portion of their refund as savings.

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Rich Williams is a program manager in NCSL's Family Economic Success Program.

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About the NCSL Blog

This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.