By Damara Parra, Supervising Financial Counselor, Financial Empowerment & Advocacy Unit
Around this time last year, we shared an article describing the basics of the Earned Income Tax Credit, who qualified for it, and how tax filers could claim the credit. This credit continues to be the largest federal tax credit for working Americans. The IRS indicated that as of December 2022, 31 million workers and families nationwide received about $64 billion in Federal Earned Income Tax Credits (EITC). The average amount of EITC received in New York was about $1,927.
This year, you have another opportunity to take advantage of this credit. For Earned Income Tax Credit Awareness Day, here are the most important things you need to know and answers to questions you may have:
- Some refunds in tax year 2022 will be smaller than in previous years.
Last year, Congress approved a temporary expansion of the EITC, along with some other tax credits, to provide additional support to taxpayers. This year, the IRS announced it will be adjusting some of those credits and that, as a result, some taxpayers “will likely receive a significantly smaller refund.”
Some of these major changes include:
- Reduction of the EITC for eligible taxpayers with no children: those who received roughly $1,500 in 2021 will now get a max of $560 for tax year 2022.
- Reduction of the Child Tax Credit (CTC): Those who got $3,600 per dependent in 2021 for the Child Tax Credit will, if eligible, get $2,000 for the 2022 tax year.
- Reduction of the Child and Dependent Care Credit: this credit returns to a maximum of $2,100 for tax year 2022 instead of $8,000 for tax year 2021.
- Tip: Regardless of the changes in these credits, we want to encourage you to make an appointment with a tax professional from the free Volunteer Income Tax Program (VITA) to ensure you receive all the credits you may be eligible for. Visit: NYC Free Tax Prep for more information.
- What is the maximum Federal Earned Income Tax Credit (EITC) that I can get this year?
For tax year 2022, the maximum amount of Federal EITC is worth up to $6,935. This credit is calculated based on your Adjusted Gross Income (AGI), filing status and the number of qualifying children. You will not qualify for this credit if you have investment income of more than $10,300.
Your AGI is your earned income before taxes (gross income) minus IRS approved qualifying expenses, such as educator expenses, student loan interest, alimony payments or contributions to a retirement account.
The table below indicates the AGI income limits at different filing status and the maximum EITC one can get in 2022:
Number of children or relatives claimed
Maximum AGI for filing status: Single, Head of Household or Widowed
Maximum AGI for filing status: Married filing jointly
3 or more
- What else do I need to know to claim this credit?
The IRS has a complete list of eligibility criteria on this website. However, below are some key things to remember:
- To claim this credit, you must have a Social Security Number and have worked and earned income in 2022. Although you do not have to work all year round, you and your qualifying dependents need to have Social Security Numbers. You will not qualify for this credit if you have an Individual Taxpayer Identification Number (ITIN).
- You are eligible to claim the EITC without a qualifying child if you meet specific IRS rules. The maximum EITC amount in these cases is $560.
- You cannot claim this credit if your filing status is “married filing separately.” For more information visit the IRS Frequently Asked Questions for divorced and separated tax filers.
- Same-sex married couples are eligible for this credit. Following a Supreme Court ruling of 2013, the IRS now treats same-sex couples, legally married in jurisdictions that recognize their marriages, as married for federal tax purposes. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.
- If you were eligible for this credit in previous years and did not claim it, you can still file past year taxes to obtain your 2019, 2020, and 2021 EITC. Most NYC Free Tax Prep sites can help you file these prior year tax returns.
Do not leave money on the table! Learn more about this credit and consult with a tax professional for any specific questions.
Still have questions?
NYLAG Financial Counselors can help you understand how this credit works and can help you review your tax return to check if you have claimed credit properly. Counselors can also refer you to VITA sites that can help you file your taxes and answer other tax questions for free if needed.
- If you are currently working with a NYLAG financial counselor, reach out to them now to discuss your tax planning options.
- Connect with a NYLAG financial counselor.