EITC – Refundable Taxes
The refundable taxes paid by the Additional Child Tax Credit and the Earned Income Tax Credit are essential for our nation’s working parents earning low wages. All of our parents must be able to pay for the healthy start that our children need. Huge subsidies exist for large businesses, yet many of these businesses pay salaries that are not a living wage. This is why refundable taxes are essential.
The Child Tax Credit (CTC) was enacted in 1997 with bipartisan support. This is a $1,000 credit for each child who is under 17 years by the end of the tax year. For example, if a Mom & Dad with two qualifying children owe $4,600 in taxes without the credit, they would owe $2,600 with the reduction of $1,000 per child.
The CTC includes a refundable component called the Additional Child Tax Credit. This means that if the value of the CTC exceeds the amount of federal income tax a family owes, the family may receive a refund check as part or all of the difference. For taxes due in April 2018, the refund equals 15 percent of earnings above $3,000, for maximum of $1,000-per-child. For example, a single mother with two children who earns $14,000 in 2017 could receive 15 percent of $11,000, or a refund of $1,650.
The Earned Income Tax Credit (EITC) was enacted in 1975 and has had bipartisan support because it encourages and rewards people who work. EITC pays refundable taxes to persons with and without children. For parents to be eligible, the earned income and adjusted gross income must fall within these limits:
One child with earned income of $39,617 or less – the maximum refund $3,400
Two children with earned income of $45,007 or less – the maximum refund $5,616
Three+ children with earned income of $48,340 or less – the maximum refund $6,318
For a Married Couple Filing Jointly with:
One child with earned income of $45,207 or less – the maximum refund is $3,400
Two children with earned income of $50,597 or less – the maximum refund is $5,616
Three+ children with earned income of $53,950 or less – the maximum refund is $6,318