Making Tax Credits Work for You

  • Earned Income Tax Credit
  • Saver’s Tax Credit
  • Child Tax Credit

Making the Federal Earned Income Tax Credit Work for You

The Earned Income Tax Credit is a tax benefit for people who work full-time or part-time.

To claim the EITC, taxpayers must meet the following rules:

  • Must have earned income.
  • Must have a valid Social Security number.
  • Must have investment income limited to $2,650 or less.
  • Filing status can not be married filing separately.
  • Generally must be a U.S. citizen or resident alien all year.
  • Can not be a qualifying child of another person.
  • Can not file Form 2555 or 2555-EZ (related to foreign earned income).

You need to have worked and have earned income less than:

  • $12,590 ($14,590 if married filing jointly) if there is no qualifying child.
  • $33,241 ($35,241 if married filing jointly) if there is one qualifying child
  • $37,783 ($39,783 if married filing jointly) if there is more than one qualifying child.

Note: the EITC Advance Payment option allows some workers who are raising children to get part of their EITC in their paychecks throughout the year and part in a check from the IRS when they file their tax return. In this way, a worker can get up to $60 extra in each bi-weekly paycheck.

Note: Workers who can qualify for an EITC may also qualify for an additional tax credit, the federal Child Tax Credit (CTC), if they meet the requirements for the CTC program as well. 

Source: Center for Budget and Policy Priorities, 820 First Street, Washington, DC 20002

Making the Federal Saver's Tax Credit Work for You

The Saver's Tax Credit, or STC, can reward workers who make contributions to a retirement plan or Individual Retirement Account (IRA). Workers can receive a tax credit worth up to 50% of the maximum $2,000 contribution (the maximum credit, therefore, is $1,000).

The credit may be claimed by taxpayers who:

  • Are 18 years of age or older.
  • Are not full-time students.
  • Are not claimed as a dependent on someone else's return.
  • Have adjusted yearly gross income no higher than these amounts:
                          $52,000 if married filing jointly
                          $39,000 if filing as head of household
                          $26,000 if filing single or married filing separately

Contributions workers elect to make through salary reduction to a variety of employer-administered retirement plans are eligible for the STC, as are contributions to both traditional and Roth Individual Retirement Accounts (IRAs). Salary reduction contributions made to the following types of plans are also eligible:

  • 401(k) plan including a SIMPLE 401(k).
  • Section 403(b) annuity.
  • Eligible deferred compensation plan of a state or local government (a governmental 457 plan).
  • Simple IRA plan.
  • Salary reduction SEP (Simplified Employee Pension).

Individuals entitled to deduct IRA contributions may still do so and also claim the Saver's Tax Credit. Voluntary after-tax contributions to a qualified retirement plan or 403(b) annuity also qualify for the Saver's Tax Credit.

Source: Center for Budget and Policy Priorities, 820 First Street, Washington, DC 2002

Making the Federal Child Tax Credit Work for You

The Child Tax Credit or CTC is a federal tax credit worth up to $1,000 for each child under 17 years of age who is claimed as a dependent on a qualified worker's tax return. Qualified workers are those who meet certain government-established income guidelines.

The Child Tax Credit may be claimed by taxpayers who:

  • Is able to claim an exemption for a dependent child under 17 years of age on his or her federal income tax return, and
  • Has taxable earned income above $11,300, and
  • Has either a Social security number (SSN) or an individual taxpayer identification number (ITIN); ITINs are issued by the Internal Revenue Service to people who are unable to obtain a SSN.

To qualify for consideration for a CTC, a worker needs to:

  • File a federal income tax return (Form 1040 or Form 1040A, but NOT Form 1040EZ).
  • File federal Form 9912, titled Additional Child Tax Credit. This form is used to find out if the family qualifies for a CTC refund and, if so, what its amount should be. Form 8812 has to be attached to the federal income tax return for a family to qualify for a CTC refund.

Note: Many low-income working families that qualify for one or more CTCs can also be eligible for the federal Earned Income Tax Credit (EITC). For many families who qualify for both types of credits, the EITC will be larger but the CTC will still form a significant income boost.

Source: Center for Budget and Policy Priorities, 820 First Street, Washington, DC 20002