How do state earned income tax credits work? Q.How do state earned income tax credits work? A.The federal earned income tax credit (EITC) provides a refundable credit to taxpayers based on their income and family circumstances (such as marital status and number of children). In 2023, 31 states and the District of Columbia additionally offer a state EITC. Most state credits are calculated as a percentage of the federal credit. Read more about How do state earned income tax credits work?
How does the earned income tax credit affect poor families? Q.How does the earned income tax credit affect poor families? A.The EITC is the single most effective means tested federal antipoverty program for working-age households—providing additional income and boosting employment for low-income workers. Read more about How does the earned income tax credit affect poor families?
What are tax credits and how do they differ from tax deductions? Q.What are tax credits and how do they differ from tax deductions? A.Credits reduce taxes directly and do not depend on tax rates. Deductions reduce taxable income; their value thus depends on the taxpayer’s marginal tax rate, which rises with income. Read more about What are tax credits and how do they differ from tax deductions?