Earned Income Tax Credit (EITC)

What this actually is

A refundable tax credit for people who worked and did not earn much. Refundable is the load-bearing word: it is not merely a reduction in tax owed, so if the credit exceeds your tax you get the difference back as an actual refund cheque. For tax year 2025 the maximum is $8,046 with three or more qualifying children, $7,152 with two, $4,328 with one, and $649 with none. That is the largest single sum available to most low-income working households, and the IRS estimates a substantial share of eligible people miss it every year — usually because their income was low enough that they did not think they had to file. You must FILE A RETURN to get it, even with no tax liability. You can also claim it for prior years you missed, generally within three years. It is included here because the most common way people lose money to it is paying for it: refund-anticipation products and percentage-of-refund preparers eat hundreds of dollars out of exactly this credit, and the free alternative is listed directly below.

Who qualifies, and what trips people up

Tax year 2025 AGI limits, filing single, head of household, married filing separately or qualifying surviving spouse: $19,104 with no children, $50,434 with one, $57,310 with two, $61,555 with three or more. Married filing jointly: $26,214 / $57,554 / $64,430 / $68,675. Investment income must be $11,950 or less. You need earned income and a valid Social Security number. What trips people up: qualifying-child rules on age, relationship, residency and joint return — a child who does not meet them all drops you to the childless credit; filing as married filing separately used to disqualify you entirely and the rules have changed, so check rather than assume; and claiming a child someone else also claims will freeze your refund. Refunds that include EITC are held by law until mid-February each year, so budget for that rather than buying an advance against it.