The Earned Income Tax Credit (EITC) is one of the most effective anti-poverty tools in the United States. Designed to support low- and moderate-income workers, this refundable tax credit not only reduces federal tax liability but can also result in a significant refund—even if no tax is owed. But while the federal EITC is widely known, many states also offer their own version of the credit. These state-level EITCs often mirror the federal version but differ in value, eligibility, and refundability. This blog explores how the federal EITC works, how states match it, and how you can maximize your total refund by claiming both.
What Is the Federal Earned Income Tax Credit (EITC)?
The federal EITC is a refundable tax credit for working individuals and families with low to moderate income. The amount of the credit depends on several factors:
- Filing status (e.g., single, married filing jointly)
- Number of qualifying children (up to three or more)
- Earned income and adjusted gross income (AGI)
For the 2024 tax year, the maximum federal EITC amounts are approximately:
- $7,830 with three or more qualifying children
- $6,960 with two children
- $4,230 with one child
- $600 with no children
To qualify, you must have earned income (wages, salaries, self-employment), meet income limits, have a valid Social Security Number, and file a tax return—even if you’re not required to file due to low income.
What Is a State-Level EITC?
In addition to the federal EITC, many states and some local governments offer their own earned income tax credits. These state EITCs typically “match” a percentage of the federal credit, though eligibility criteria and refundability rules may vary.
As of 2024, more than half of U.S. states offer a state EITC, including major states like California, New York, Illinois, and Colorado. The goal is to supplement the federal benefit and further reduce poverty among working families.
How State EITCs Work
Most state EITCs are calculated as a percentage of the taxpayer’s federal EITC amount. For example, if your federal EITC is $2,000 and your state offers a 30% match, you’d receive an additional $600 from your state.
Key Features:
- Percentage Match: State credits typically range from 3% to 50% of the federal EITC
- Refundability: Some state credits are fully refundable, while others are non-refundable or partially refundable
- Eligibility: Most states follow federal eligibility rules, but some impose additional requirements (e.g., age, residency, filing status)
- Automatic Calculation: In most cases, the state EITC is calculated automatically when you file a state return with a federal EITC claim
Examples of State-Level EITC Programs
California
The California Earned Income Tax Credit (CalEITC) offers a state-level credit for low-income workers. It is available even to those earning less than federal EITC thresholds and includes additional credits like the Young Child Tax Credit (YCTC). California’s EITC is fully refundable.
New York
New York offers one of the most generous state EITCs at 30% of the federal credit. It is refundable and mirrors most federal EITC rules. New York also provides a city-level EITC in New York City, offering an additional benefit for residents.
Maryland
Maryland offers both a refundable and non-refundable state EITC. Taxpayers can choose which version benefits them more. The refundable credit equals 28% of the federal EITC.
Colorado
Colorado recently expanded its EITC to 50% of the federal amount, making it one of the most generous in the nation. The credit is fully refundable and available even to filers using an Individual Taxpayer Identification Number (ITIN).
Illinois
Illinois matches 20% of the federal EITC and offers the credit to both citizens and certain non-citizens using an ITIN. It is fully refundable.
States Without an EITC
Not all states provide a state-level EITC. Some states—particularly those without an income tax like Texas, Florida, and Nevada—do not offer a state EITC. Others may have income taxes but have chosen not to implement an EITC program. In these states, taxpayers are limited to the federal benefit alone.
How to Claim a State EITC
To claim a state earned income credit, you generally must:
- Qualify for and claim the federal EITC
- File a state tax return
- Complete the appropriate state EITC form (often included in your state tax software)
Tax software usually includes state EITC calculations automatically. However, it’s important to verify your eligibility and ensure the credit was applied, especially in cases where you use an ITIN or have non-traditional income sources.
Refundable vs. Non-Refundable Credits
One key distinction in state EITCs is whether the credit is refundable:
- Refundable Credit: If your state EITC exceeds your state tax liability, you receive the balance as a refund
- Non-Refundable Credit: You can reduce your tax to zero, but you won’t receive a refund of the remaining credit
Refundable credits are generally more beneficial to low-income households who often owe little or no state tax. States like Oregon and Minnesota have partially refundable EITCs, while others like Delaware offer only non-refundable versions.
Tax Planning Tip: Combine State and Federal EITCs
Taxpayers in states that offer an EITC should make sure to claim both credits in the same year. The federal EITC boosts your federal refund, while the state EITC can significantly increase your overall refund or reduce your state tax bill.
For example, a family with three children earning $25,000 per year might qualify for:
- $7,830 in federal EITC
- $2,349 in New York state EITC (30%)
- $300+ from NYC’s local EITC
That’s over $10,000 in potential refundable credits—an amount that can meaningfully impact a family’s financial situation.
Special Considerations
- ITIN Filers: Some states now allow EITC claims for workers using Individual Taxpayer Identification Numbers. Check your state rules if you do not have a Social Security Number.
- Young Workers: Some states, like California, offer their EITC to younger adults aged 18–24, even if they do not have dependents—unlike the federal EITC which typically requires filers to be at least 25 with no children.
- Self-Employed Individuals: Gig workers and freelancers can qualify for both federal and state EITCs as long as they meet the earned income guidelines.
Conclusion: Maximize Your Refund with Federal and State EITCs
The Earned Income Tax Credit remains one of the most valuable tax benefits for working families and individuals. If you qualify for the federal EITC, don’t miss out on additional money available through your state. State-level matches can boost your refund by hundreds—or even thousands—of dollars, helping you pay bills, build savings, or reduce debt.
Each state’s rules are different, so it’s important to review your state’s tax instructions or consult a tax professional to ensure you’re claiming every dollar you deserve. When combined strategically, the federal and state EITCs can be a game changer in your financial well-being.
