Definition
A refundable federal tax credit for workers with low to moderate earnings, sized by income, filing status, and number of qualifying children. Refundable means it can exceed the tax you owe: the difference arrives as a refund. The IRS recalculates the income ranges and credit amounts every year.
Why it matters
The EITC is one of the largest cash benefits in the tax code and a large share of eligible workers never claims it. Filing a return is required to get it, even in years when income is low enough that filing is otherwise optional.
Example
A single parent with two children works part-time and owes $600 of federal income tax. Their EITC comes to $4,000, so the credit erases the $600 and the remaining $3,400 arrives as a refund, because the credit is refundable.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.