1
Phase-in
From the first dollar of earned income, the credit grows as a percentage of what you earn. More work means a bigger credit, which is the point.
Charles Trautman, EA · Since 1969
The biggest refundable credit in the tax code, and the one the IRS watches most closely.
The Earned Income Tax Credit was built for people who work and don’t earn a lot. It is refundable: if the credit is bigger than the tax you owe, the IRS sends you the difference. For a family with three children it can be worth more than $8,000 in 2026. It also has more rules than almost any other line on the return, which is why EITC refunds are held every February and why EITC returns are audited more often than most.
Current as of October 2026 · Figures are for tax year 2026
The maximum depends on how many qualifying children live with you. The actual credit depends on how much you earned.
| Qualifying children | Maximum credit |
|---|---|
| None | $664 |
| One | $4,427 |
| Two | $7,316 |
| Three or more | $8,231 |
A nonrefundable credit can only cancel tax you owe; once your tax reaches zero, the rest is lost. The EITC keeps going. A single parent with two children who owes no tax at all can still receive the full credit as a refund.
The credit is figured from your earned income: wages, salary, tips and net self-employment income. Pensions, Social Security, unemployment and child support are not earned income and do not count toward it.
It is not a flat amount. It rises, levels off, and then falls away.
From the first dollar of earned income, the credit grows as a percentage of what you earn. More work means a bigger credit, which is the point.
The credit reaches its maximum and stays there for a range of earnings. A family on the plateau gets the full amount in the table above.
Past the plateau the credit shrinks with every extra dollar of income until it reaches zero. The ceiling is roughly $18,600 for a single filer with no children and $25,500 for a married couple with none, rising to approximately $63,100 single and $70,200 joint with three or more children. These are approximate; the exact lines come from the IRS tables.
Which income? The phase-out looks at the larger of your earned income and your adjusted gross income. A retiree with a part-time job and a pension can be phased out by the pension even though the pension did not help earn the credit.
The software figures the credit from a table, so the taxpayer never sees the shape. We do, and it changes advice. A worker on the phase-in side gets a bigger credit by earning more. A worker on the phase-out side loses credit with every raise, and when that loss stacks on top of income and payroll tax, the effective rate on extra overtime can be startling. Before anyone decides whether a second job is worth it, we look at which side of the plateau they are on.
Every one of these has to be true. Miss one and the credit is zero.
You must have earned income from a job or self-employment during the year. A return with only Social Security, a pension, or unemployment does not qualify, no matter how low the income is.
Interest, dividends, capital gains, rents and similar income must total $12,200 or less for 2026. One large stock sale can wipe out the credit for a family that otherwise qualifies.
You, your spouse if you file jointly, and every child you claim must have a valid Social Security number issued before the return’s due date. An ITIN does not work for this credit.
A worker with no qualifying child must be at least 25 and under 65 at the end of the year and cannot be claimed as someone else’s dependent.
A child must be related to you, must have lived with you in the United States for more than half the year, and must meet the age test. The rules are the same ones that decide who is a dependent, with a few differences. Who counts as a dependent.
The residency test is where most of the trouble is. A parent who pays child support but whose child lives with the other parent does not have a qualifying child for the EITC, even if a divorce decree lets that parent claim the child for the child tax credit. The EITC always follows the home.
EITC errors are among the most common reasons a return gets audited. Most of them are honest and most of them are avoidable.
The most common error. The question is not who supports the child; it is where the child slept more than half the year.
When separated parents, or a parent and a grandparent in the same house, both claim one child, the IRS applies tie-breaker rules and one return gets corrected. Both are delayed while it sorts out.
Because the credit rises with earnings on the phase-in side, there is a temptation to report self-employment income that was never earned, or to leave off expenses. The IRS looks hard at Schedule C returns with EITC and no records. Overstating income is as much a problem as understating it.
What we ask for: a record of what you were paid and what you spent. A notebook is fine. “About $9,000, cash” is not.
Paid preparers are required by law to complete a due-diligence checklist, Form 8867, for every return that claims the EITC, and to keep the answers and the documents behind them. That is why we ask who lived in your house, for how many months, and whether anyone else could claim the child. The questions are not suspicion. They are the law, and a preparer who skips them is fined. A preparer who does not ask them is a preparer to avoid.
File in January if you like. The money will not come before mid-February.
A law known as the PATH Act requires the IRS to hold the entire refund on any return that claims the EITC or the refundable part of the child tax credit until mid-February, to give it time to match your W-2s against what employers filed. The hold applies to the whole refund, not just the credit portion, no matter how early you file.
In practice, most of these refunds arrive late in February or early in March with direct deposit. If you are counting on the money, plan around that date rather than the day you filed. Two things make the wait longer: a name or Social Security number that does not match Social Security’s records, and a child claimed on more than one return.
Colorado has its own earned income credit, and it is figured from the federal one.
If you qualify for the federal EITC, you qualify for Colorado’s. The state credit is a percentage of the federal credit, currently approximately half, and it is refundable too. It is claimed on the Colorado return and the software carries it over. Colorado also allows the credit to some residents shut out of the federal one, including workers who file with an ITIN; ask us if that describes you. More on Colorado income tax.
For the EITC. It is paid out as a refund whether or not you owe anything, but only if you file a return and claim it. Every year a share of the people who qualify leave it unclaimed because nobody told them to file. Do I need to file?
The parent the child lived with for more nights. If it is truly equal, the parent with the higher adjusted gross income. The EITC cannot be traded back and forth by agreement the way the child tax credit can.
Yes, if you file within three years of the original due date. Refunds older than that are forfeited. If you have unfiled years, we can go back and look. Catching up on unfiled returns.
Because it is refundable and eligibility depends on facts the IRS cannot see, like who lived where. Audits are usually letters asking for proof of residency: school records, a lease, medical records with the child’s address. Keep those.
We prepare EITC returns every season, ask the questions the law requires, and keep the records that make an audit letter a short conversation. In person in Lone Tree or remotely, year round.
This page is general information, current as of October 2026, and is not advice about your situation. Tax law changes every year. Confirm anything that matters to you with us or at the sources below.