10 Things to Know About the Expanded EITC
By Teon Dolby
America’s young adults have one of the highest poverty rates compared to all other age groups, driven by lack of access to well-paid, quality jobs. In 2020, the poverty rate for young people ages 18-24 was 14.6 percent. During the height of the pandemic-induced recession, over 90 percent of unemployed young adults could not access any form of income. And young adults of color, especially, experience systemic barriers to stability and upward mobility, including employment instability, housing insecurity, and disconnection from school.
Until recently, young workers without children in the household were not qualified to receive the Earned Income Tax Credit (EITC)—a key anti-poverty program that has long enjoyed bipartisan support. The American Rescue Plan (ARP), which passed in March 2021, temporarily expanded EITC eligibility during the 2021 tax year to young workers who do not have dependents and increased the amount of the credit.
As tax time approaches, here are 10 things you should know about the expanded EITC for workers without children or whose children do not live with them full time.
1. The ARP temporarily lowered the age of eligibility from 25 to 19. The ARP also temporarily removed the upper age limit, making workers without qualifying children who are 65 and older eligible to receive the tax credit. Under prior law, only “childless workers” between ages 25 and 65 were eligible for the EITC.
2. The maximum credit available to workers without dependent children increased from $543 to $1,502. This expansion will provide income support to over 17 million people who work for low pay. The increased amount can allow young workers to pay rent, pay down student loans, and save for the future.
3. You must have earned income to be eligible for the tax credit. Workers with earnings of $9,820 to $11,610 ($17,550 for married taxpayers filing jointly) receive the maximum credit in 2021. The credit phases out as income increase above that level, reaching zero at $21,430 ($27,380 for married filing jointly). Unemployment benefits, Social Security, Supplemental Security Income, and pension payments do not count as earnings, but net earnings from self-employment do. EITC is fully refundable, meaning you can qualify for it even if you don’t owe federal income taxes.
4. ARP includes a provision to help workers who lost their jobs. For 2021, you can use either your 2019 income or 2021 income to calculate your EITC. This means that if you lost your job due to COVID-19, you might still be able to get the credit, even if you had no earnings in 2021.
5. Saying the EITC expansion benefits “childless” workers is misleading. Workers with low incomes who are noncustodial parents or whose children live with them less than six months of the year benefit from the expanded EITC. Eligibility also applies to workers who care for nonbiological children they do not claim on their taxes or whose children are grown up.
6. Unfortunately, most young workers attending college at least part-time are still not eligible for the credit until age 24. This fails to reflect the realities of many college students with low incomes, who often must work to meet their tuition and living expenses.
7. Youth who are homeless or individuals transitioning out of foster care are subject to special rules. They become eligible for the EITC at age 18 and can receive it even if they attend school. A qualified foster youth is a person who was in foster care at age 14 or later. Qualified youth who are homeless must certify that they are homeless or on the verge of experiencing homelessness. This can include living in a shelter, couch surfing, or living in a car.
8. You must have a Social Security number to receive the federal EITC. Some states, such as California and Colorado, allow citizens with an Individual Tax Identification Number (ITIN) to qualify for their state EITCs. Note: 30 states plus DC, Guam and Puerto Rico operate their own EITC programs with their own rules.
9. Tax filers must submit a federal tax return for 2021 to get the EITC they are eligible for, even if they otherwise are not required to file. The 2021 filing season opens in January 2022. People can get free help filing their returns from VITA programs or online services like GetYourRefund.org. More information and resources for filing a tax return and claiming the EITC can be found on the Get it Back Website.
10. As passed by the House, Build Back Better would extend the EITC improvements for tax year 2022. The Senate bill should also include this provision. Ultimately, making the EITC improvements permanent would be a critical step toward improving the financial wellbeing of young adults and other workers without dependent children.