By Rich Williams
The federal Earned Income Tax Credit (EITC) is a popular government policy bolstering the financial security of low-income workers and their families. It provides low-income tax filers with a refundable tax credit against their federal income tax liability.
Although 25 million tax filers received $61 billion in credits in 2019, millions more don’t claim their credit. Nationally, 20% of filers eligible for the EITC don’t claim it, meaning millions of tax payers and their families are missing out on billions of dollars each year.
To increase the number of eligible tax filers claiming their credit, the IRS is hosting its 14th annual EITC Awareness Day on Jan. 31. If you or your organization would like to participate in EITC Awareness Day, the IRS has ready-made resources adaptable to your needs.
Many states are passing legislation to build on the benefits of federal EITC. Thirty-four states, the District of Columbia, Guam and Puerto Rico have laws addressing their local EITC and/or the federal credit. In 2019, 10 states enacted new laws creating, modifying or funding outreach for their EITCs.
New State EITC Laws in 2019
Utah became the 30th state to create a state EITC. Utah’s credit is refundable and equal to 10% of the tax filers’ federal credit. The Utah credit is unique in that it limits eligibility to those experiencing “intergenerational poverty” as defined in statute.
Four states—Ohio, Oregon, Minnesota and New Mexico—increased the value of their state EITC. Ohio increased its nonrefundable credit from 10% to 30% of what a tax filer receives in federal credit and removed the phaseout for incomes over $20,000. Oregon raised its EITC from 8% to 9% of what tax filers receive in federal credit. For tax filers with a dependent under the age of 3, the credit is increased from 11% to 12%. New Mexico raised its working family tax credit from 10% to 17% of the federal EITC.
California, Maryland, Iowa and Virginia provided funding for EITC outreach and tax preparation assistance. For example, Maryland lawmakers appropriated $200,000 for the CASH Campaign of Maryland to promote the financial well-being of low-income individuals and families by providing outreach, education and free tax-preparation services, which include claiming the EITC, if eligible.
Maine raised the value of its EITC for workers without qualifying children, joining California, Maryland, Minnesota and the District of Columbia in a recent trend of EITC expansions for childless workers.
For more information on state EITC laws, visit NCSL’s EITC webpage.
Rich Williams is a program manager in NCSL’s Children and Families Program.