Why It Matters

A Congressional Research Service (CRS) report updated September 14 explains the Earned Income Tax Credit (EITC), and who receives it.

According to the report, in 2023, 24.5 million tax returns included the EITC, which provided $65.3 billion in total benefits. That structure makes the EITC both a tax provision and a cash benefit, since a recipient does not need to owe taxes to receive the refundable portion. For Congress, changes to the credit would affect eligibility rules, payment amounts, administration, and the treatment of refunds in other federal programs.

The Big Picture

The credit is authorized by Section 32 of the Internal Revenue Code and administered through the federal income tax system. Under current law, eight formulas calculate the benefit from earned income, with results varying by the number of qualifying children and marital status.

A claimant generally must file a federal return, have earned income, satisfy residency rules, provide work-authorized Social Security numbers, and remain below the applicable income and investment-income limits. The rules also distinguish among types of income, allowing some Medicaid-waiver payments and elected combat pay to count while excluding pensions, certain nonresident income, prison labor income, and specified Temporary Assistance for Needy Families payments. For 2026, the maximum credit ranges from $664 for a taxpayer with no qualifying children to $8,231 for a taxpayer with three or more children.

In 2026, according to the report, an unmarried taxpayer with one child has a $23,890 phaseout threshold, and the EITC is completely phased out at $51,593 of adjusted gross income or earned income, depending on whichever is greater. Meanwhile, married joint filers have phaseout thresholds $7,270 higher than unmarried filers with the same number of children.

The Bottom Line

Changing the formula can alter both who qualifies and how much arrives as a refund. That distinction matters: $55.9 billion of 2023 benefits exceeded income and other tax liabilities and was paid as refunds, while $9.4 billion offset other taxes collected on income-tax returns.

The credit's history also includes the 2021 temporary expansion for taxpayers without qualifying children, which expired at the end of that year. The participation picture leaves another issue for policymakers: according to the Internal Revenue Service, 81% of eligible recipients received the credit for 2022, while estimated unclaimed benefits represent roughly 11% to 15% of potential benefits.

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