State Earned Income Tax Credit

By | March 7, 2015

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:


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.


More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)