Earned Income Credit Increases

Earned Income Credit Amounts Increase

Earned Income Credit Increases - Twenty-four states (counting the District of Columbia) have enacted an Earned Income Tax Credit (EITC), a tax reduction and a wage supplement for low- and moderate-income working families. State EITCs are based on the federal EITC, which a large body of evidence has shown to serve a number of important public policy goals. States that enact EITCs can reduce child poverty, cut taxes, and increase the incentive to work for families struggling to make ends meet.

Earned Income Credit Increases Amounts 2008

The EITC benefit that an eligible family receives depends on the family’s income. For families with very low earnings, the value of the EITC increases as earnings rise. For example, families with two or more children receive an EITC equal to 40 cents for each dollar up to $12,060 earned, for a maximum benefit of $4,824. Families with one child receive an EITC equal to 34 cents for each dollar earned up to $8,580 of earnings, for a maximum benefit of $2,917. Families continue to be eligible for the maximum credit until income reaches $15,740 (or $18,740 for married-couple families).

The largest EITC benefits go to working families with incomes below the federal poverty line, but many families with incomes well above the poverty line benefit to at least some degree. (The 2008 federal poverty line is about $22,000 for a family of four.) This is because the EITC phases out gradually as income rises above $15,740 for single-parent families or $18,740 for married couples.

Single-parent families with two or more children are eligible for some EITC benefit until income exceeds $38,646, while such families with one child remain eligible for some EITC benefit until income exceeds $33,995. For married couples, the maximum eligibility levels are $41,646 for two or more children and $36,995 for one child.


You can do this by giving your eligible employees part of the Earned Income Tax Credit (EITC) with their pay, and by subtracting the payments you make from payroll taxes. This is possible through the Advance Earned Income Credit (AEITC) program.

Generally, you make the advance payments from withheld income tax and employee and employer Social Security and Medicare taxes. However, the payment doesn't change the amount of employment taxes you would usually withhold from the employee's pay. If the employee is entitled to an advance payment that is more than his or her withholding, you can still make a payment to the employee.

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