The federal EITC has been wildly successful, increasing workforce participation and helping 6.5 million Americans escape poverty in 2012, including 3.3 million children. Children of EITC recipients have been shown to be born healthier, perform better in school, attend college at higher rates, and earn more as adults than those children who grow up in families not receiving the EITC. Roughly half of all taxpayers with children make use of the EITC at least once during their lives, often for only a year or two at a time.
EITC is Refundable Tax Credit
Without refundability, a state EITC will not even begin to offset the most regressive taxes low-income families face. As such, refundability is by far the most important design choice confronting state policymakers. No matter how high the state EITC percentage is, if it is not refundable, it will be ineffective. Many states have refundable earned income tax credits.
What States have Earned Income Tax Credit?
Twenty-six states (counting the District of Columbia) have created earned income tax credits (EITCs) to help families struggling to get by on low wages make ends meet and provide basic necessities for their children. These credits build on the benefits of the federal EITC, offering a hand up to families that work. They also are easy to administer, with nearly every dollar going directly to the working families that the credits were created to help.
State EITC Programs
States with EITCs report very low administrative costs — typically less than 1 percent — so nearly every dollar a state spends on the EITC goes directly to the working families in need of help. To provide its own credit, a state need only add one line to its income tax form, and the calculation is very simple. State EITCs typically are set as percentage of the federal credit. Filers simply multiply that percentage (which ranges from 3.5 percent to 40 percent, depending on the state) by the amount of their federal EITC to determine the amount of their state EITC.
More Information About State Earned Income Tax Credit Programs
The federal government, 26 states and the District of Columbia have credits. More than 28 million citizens received almost $66 billion in federal, refundable credits in tax year 2014. Below is a list of states that have their own earned income tax credit programs:
- 2015 Colorado Earned Income Credit Colorado EITC Claimed in 2016
- 2015, 2016 Connecticut earned income credit CT EITC
- 2015 Delaware Earned Income Tax Credit Delaware EITC
- 2015, 2016 DC Earned Income Tax Credit District of Columbia EITC
- 2015, 2016 Illinois Earned Income Tax Credit IL EITC
- 2015, 2016 Indiana Earned Income Credit Indiana EITC
- 2015, 2016 Iowa Earned Income Tax Credit Iowa EITC
- 2016, 2016 Kansas Earned Income Tax Credit Kansas EITC
- 2015, 2016 Louisiana Earned Income Tax Credit LA EITC
- 2015, 2016 Maine Earned Income Tax Credit Maine EITC
- 2015, 2016 Maryland Earned Income Tax Credit MD EITC
- 2015, 2016 Massachusetts earned income tax credit MA EITC
- 2015, 2016 Michigan Earned Income Tax MI EITC
- 2015, 2016 Minnesota earned income tax credit MN EITC
- 2015, 2016 Nebraska earned income tax credit EITC
- 2015, 2016 New Jersey earned income tax credit EITC
- 2015, 2016 New Mexico earned income tax credit EITC
- 2015, 2016 Ohio earned income tax credit EITC
- 2015, 2016 Oklahoma earned income tax credit EITC
- 2015, 2016 Oregon Earned Income Credit EITC
- 2015, 2016 Rhode Island earned income tax credit EITC
- 2015, 2016 Vermont Earned Income Tax Credit EITC
- 2016, 2016 Virginia Earned Income Tax Credit EITC
- 2015, 2016 Washington Earned Income Tax Credit EITC
- 2015, 2016 Wisconsin Earned Income Credit WI EITC
States without Earned Income Tax Credit
States without an income tax can also offer an EITC. In 2008, Washington became the first such state to pass legislation for an EITC, though it has yet to implement the credit. The tax systems of non-income-tax states take a much larger share of income from low-earning families because of their reliance on excise taxes, property taxes, and in most cases sales taxes. EITCs can help working families in these states keep more of what they earn.