State Earned Income Tax Credits
State earned income tax credits provide an additional benefit to the federal credit for low-income taxpayers by reducing their state income tax liability. Current state EITC policies are modeled after the federal credit, but vary somewhat on eligibility standards, methods for calculating the credit amount, refundability, awareness and outreach efforts, and data tracking requirements.
State EITC eligibility requirements often closely match federal requirements; however, there are some differences. Wisconsin’s credit does not apply to childless workers, and California’s credit focuses on a narrower segment of income levels than the federal credit. Most states—with notable exceptions including California, Minnesota, North Dakota and Washington—calculate their EITCs as a percentage of the federal credit, ranging from 3% in Montana to 125% in South Carolina. Minnesota calculates their state EITC based on a percentage, but also accounts for household income level. California, Colorado, Maryland and Washington expanded eligibility to include individuals using a valid individual taxpayer identification number.
Washington is the only state without state income tax and a state EITC. Eligible Washington residents apply to the Washington Department of Revenue to receive the credit. The state verifies eligibility by matching IRS data to the application. The revenue department is required to work with the IRS to pay the rebate automatically as quickly as possible. Filers who are eligible for the federal EITC are also eligible for the Washington EITC, with the state credit amount based on the filer's income and family size.
Twenty-seven states, the District of Columbia, Guam and Puerto Rico have a refundable earned income tax credit, similar to the federal government. Delaware and Maryland offer a refundable and nonrefundable EITC, but applicants much choose one or the other. To be eligible for EITC refunds at the state and federal levels, a tax return must be filed. Since many low-income workers are not required to file a return, they often miss out on the full value of refundable credits. In response, several states have implemented measures to increase the awareness of EITCs. Iowa and Maine are among states that require beneficiaries of certain assistance programs to be informed of the benefits of EITCs.
Laws in Oregon, Vermont and Virginia directly charge state agency heads with leading EITC outreach activities. Oregon requires its Bureau of Labor and Industries commissioner to adopt rules requiring employers to share information about state and federal EITCs with their employees. In addition, several states including Iowa, Oklahoma, Texas and Virginia appropriate funds or implement measures to help state and federal EITC-eligible families prepare their tax filings.
Some states including California, New Jersey and Hawaii require state EITC statistical data to be collected and reported. Hawaii’s law, for example, requires the director of taxation to prepare an annual report detailing the number of credits granted, the total dollar amount granted and the average credit value distributed for specified income ranges during the prior calendar year. Arizona, Texas and West Virginia have laws related to the federal EITC. Arizona requires the Department of Economic Security to provide all child care subsidy recipients with information regarding the federal EITC. Texas mandates the state's Workforce Commission assist recipients of TANF and other low-income workers with applying for the federal EITC.
For a list of enacted legislation related to earned income tax credits, please see NCSL’s Earned Income Tax Credits Enactments.
Table 2: State Earned Income Tax Credits as of January 2023
STATE |
PERCENTAGE OF FEDERAL CREDIT |
REFUNDABLE |
Arkansas*
|
Flat dollar amount ranging from $10 to $300 depending on filing status and income level.
|
No
|
California
|
California uses different income levels and phase out calculations than the federal EITC.
|
Yes
|
Colorado
|
20% in 2022; 25% by 2023; 20% after 2026
|
Yes
|
Connecticut
|
23%
|
Yes
|
District of Columbia
|
55%
|
Yes
|
Delaware
|
4.5%
20%
|
Yes
No
|
Hawaii
|
20%
|
Yes
|
Illinois
|
20%
|
Yes
|
Indiana
|
9%
|
Yes
|
Iowa
|
15%
|
Yes
|
Kansas
|
17%
|
Yes
|
Louisiana
|
5%
|
Yes
|
Maine
|
25% for workers without dependent children; 12% for all other eligible taxpayers
|
Yes
|
Maryland*
|
45%
50%
|
Yes
No
|
Massachusetts
|
30%
|
Yes
|
Michigan
|
6%
|
Yes
|
Minnesota*
|
25% to 45% (depends on income)
|
Yes
|
Missouri*
|
10% to 20%
|
No
|
Montana
|
3%
|
Yes
|
Nebraska
|
10%
|
Yes
|
New Jersey
|
40%
|
Yes
|
New Mexico
|
20% in 2021; 25% beginning in 2023
|
Yes
|
New York
|
30%
|
Yes
|
North Dakota*
|
$350 for individuals
$700 for couples filing jointly
|
No
|
Ohio
|
30%
|
No
|
Oklahoma
|
5%
|
Yes
|
Oregon
|
9%
12% (for families with children under the age of 3)
|
Yes
|
Rhode Island
|
15%
|
Yes
|
South Carolina*
|
104.07% in 2022; 125% by 2023
|
No
|
Utah
|
15%
|
No
|
Vermont
|
36%
|
Yes
|
Virginia
|
15%
|
Yes
|
Washington*
|
Flat dollar amount dependent on household size
$300 (no children)
$600 (one child)
$900 (two children)
$1,200 (three or more children)
|
Yes
|
Wisconsin
|
4% (one child) 11% (two children) 34% (three children)
|
Yes
|