The Earned Income Tax Credit in Colorado
The Earned Income Tax Credit (EITC) is a federal tax credit that helps low-income working families help themselves. It rewards low- and moderate-income families for their hard work and helps them close the gap between what they earn and what they need to get by and get ahead. Columbia University's National Center for Children in Poverty found the EITC reduces poverty among young children by nearly 25%.
The EITC can make a significant difference for hardworking families. For Tax Year (TY) 2006, it is worth as much as $4536 to families. For example, a single parent raising two children and earning $14,500 is eligible for an EITC refund of $4,536 – a 31% increase in family income. Many qualifying families are also eligible for the Child Tax Credit, as much as $1000 per child this year.
Workers access the benefits of the EITC by filing a tax return. Workers who qualify can get back some or all of the federal withholding they paid throughout the year. They may also get additional cash back from the IRS, because the EITC is a refundable credit. The amount is based on how much people work and the number of qualifying children.
The EITC has a long history of bipartisan support. Started under President Gerald Ford and expanded by Presidents Ronald Reagan, George H.W. Bush and Bill Clinton, the EITC has become the nation’s largest and most effective antipoverty program. More than 20 states have followed suit and enacted state EITCs. Many states, including Colorado, have made these refundable, like the federal credit.
Released June 5, 2007