Today is Earned Income Tax Credit (EITC) Awareness Day, which helps ensure that low- and moderate-income people who are eligible for the EITC actually receive it. As we work to expand our outreach on this important credit, we also need to celebrate all that this credit does for residents, businesses and communities in Michigan and nationwide.
- The EITC is a proven effective anti-poverty tool that rewards work and helps workers take steps toward self-sufficiency. It helps workers in every area of the state, rural and urban, and in a wide variety of industries.
- Research shows that the EITC has a long-lasting, positive effect on children, immediately improving their well-being but also helping them do better and go farther in school and to have higher earnings in adulthood. It is a true two-generation approach.
- The EITC only goes to families and individuals who work and pay taxes. To qualify, a worker must have earned income from a job and meet certain income requirements. For tax year 2015, the most a married couple with three or more kids can make to still be eligible is $53,267.
- The maximum credit depends on income and the number of qualifying children. For tax year 2015, a married couple with two children may be eligible for up to $5,548.
- The EITC is refundable—meaning that if the eligible credit amount is greater than a worker’s tax liability, he or she will get the balanced refunded. In that way, the EITC is always beneficial regardless of a worker’s tax situation.
- In tax year 2014, about 807,000 Michigan taxpayers raising over 1 million children received the federal EITC.
- The federal EITC averaged $2,448 in 2014, which was higher than the national average of $2,400. In fact, Michigan had the 14th highest credit average in the nation.
- The federal EITC helped pull 6.2 million Americans above the poverty line, including 3.2 million children, based on the most recent data. The Michigan Department of Treasury estimates that the federal EITC pulled 88,080 Michigan workers above the poverty line in 2013.
- The federal EITC returned about $2.0 billion back to Michigan’s economy. Workers use their credits to pay for things that help them keep working, such as child care and transportation, as well as groceries, utility bills and paying down debt
- Michigan supplements the federal EITC with a state tax credit equal to 6% of the federal credit. In 2013, according to the Department of Treasury, about 780,500 taxpayers raising over 1 million children claimed a tax credit averaging $140. The Michigan credit alone helped pull over 6,700 Michigan residents above the poverty line.
The Earned Income Tax Credit and its impact on workers, communities and the state is amazing. However, more needs to be done. Based on 2012 data, only about 82% of eligible workers actually claimed the EITC. While this is better than the national average at 80%, nearly 1 in 5 eligible Michigan workers leaves much-needed money on the table at tax time.
To see if you’re eligible, and to get some free tax preparation help, go to: http://michiganfreetaxhelp.org/.