Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC/EIC) is a refundable tax credit for low-to-moderate income workers. The maximum credit for 2025 is $7,830 with 3+ qualifying children. Taxpayers must have earned income, a valid SSN, and investment income below $11,600.
Exam Tip
EITC is refundable. Max $7,830 (3+ kids). Investment income limit $11,600. Cannot use MFS. Valid SSN required. Due diligence penalty = $560 per failure.
What is the EITC?
The EITC is a refundable credit designed to supplement wages for low-to-moderate income workers. It reduces tax liability and can result in a refund even if no tax is owed.
2025 EITC Maximum Credits
| Children | Maximum Credit | Income Limit (Single) | Income Limit (MFJ) |
|---|---|---|---|
| 3+ | $7,830 | $59,899 | $66,819 |
| 2 | $6,960 | $55,768 | $62,688 |
| 1 | $4,213 | $49,084 | $56,004 |
| 0 | $632 | $18,591 | $25,511 |
Eligibility Requirements
| Requirement | Details |
|---|---|
| Earned income | Wages, salaries, self-employment income |
| Valid SSN | For taxpayer, spouse, and qualifying children |
| Investment income | Must be $11,600 or less |
| Filing status | Cannot be MFS |
| US residency | Must live in US more than half the year |
Exam Alert
EITC is REFUNDABLE. Due diligence requirements (Form 8867) apply -- $560 penalty per failure. Cannot file MFS. Investment income limit $11,600. Must have valid SSN (not ITIN). Preparers must complete due diligence for EITC, CTC, AOTC, and HOH claims.
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Related Terms
Child Tax Credit (CTC)
The Child Tax Credit provides up to $2,000 per qualifying child under age 17. The credit phases out at $200,000 AGI (single) and $400,000 (MFJ). The refundable portion (Additional Child Tax Credit/ACTC) is up to $1,700. The child must have a valid Social Security number.
Due Diligence
Due diligence is the investigation period in a real estate transaction during which buyers thoroughly examine the property, review documents, and verify all aspects of the purchase before finalizing the deal.
Dependent
A dependent is a person who meets the qualifying child or qualifying relative tests and can be claimed on another taxpayer's return. Claiming a dependent provides eligibility for various credits, deductions, and favorable filing status.
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