This year, a one-time tax cut is available to millions of low-income Americans. As a result of the federal Earned Income Tax Credit (EITC), which is designed to help low-wage workers, the EITC is being increased for childless adults.
Those without children who are low-income can claim a credit of up to $1,500 for the most recent tax year, which is approximately three times the value of the benefit in 2020. An additional $1.9 trillion in pandemic relief was put into law by President Joe Biden last year as part of his American Recovery and Resilience Act.
“For everyone above the age of 19 who isn’t a full-time student and has earned income, the American Rescue Plan allows them to claim the enlarged EITC. Both age and income eligibility were increased, as well as the credit amount.
“At the Center for Budget and Policy Priorities, a liberal think tank, Kris Cox is the deputy director of federal tax policy.
Who can apply?
The American Rescue Plan increased the EITC eligibility of childless employees by increasing the income thresholds. This tax season, taxpayers without children who earned up to $21,430 in wages from a job, side gig, or self-employment can claim the credit.
In most years, employees making more than $16,000 are ineligible for the EITC.) In addition, taxpayers who lost their jobs in 2020 may be able to claim a credit based on income from 2019.
The EITC’s age limit has likewise been abolished by the IRS. The benefit was previously restricted to employees aged 25-64. Workers 19 and older who satisfy the income standards, as well as 18-year-olds who are homeless or who have been in foster care, are eligible for the credit this year.
17 to 20 million workers are expected to gain from the increased credit, including older and younger workers, as well as those who will earn more money than usual, according to policy experts.
Read More: $3,000 Stimulus Check to Hit Your Bank This Month. Check Out Why?
“Excluded completely”
In the fight against poverty, the Earned Income Tax Credit (EITC) has been dubbed the most successful U.S. anti-poverty initiative. Over 5 million individuals have been lifted out of poverty as a result of President Gerald Ford’s work-rewarding initiative.
As opposed to other tax credits, the Earned Income Tax Credit (EITC) can be refunded. That implies that even if workers don’t owe any taxes, they’ll still get a financial boost from the program.
Most years, workers who do not have children receive a minor financial incentive for their efforts. Those who worked alone and made under $15,800 were not eligible for the tax relief last year; the highest credit was only $540 for individuals. The credit of $5,800 would be available to a single parent of two earning the same $15,800.
According to Cox, “What this meant was that people working for very low pay who were getting such a small EITC, as well as young working adults and older working adults, were completely excluded.”
The lower EITC value for childless workers means they are less likely to claim the credit, even though they are entitled to it. According to Cox, almost two-thirds of eligible childless taxpayers claim the EITC every year, whereas more than 80% of taxpayers with children do the same.
Moreover, the larger credit comes at a time when inflation is eating away at low-wage employees’ salary gains.
“People without dependent children may not have to worry about daycare costs, but they do have to spend extra for things like food, petrol, and rent.
These basic needs may be out of reach for certain people “Senior state policy analyst at the Institute on Taxation and Economic Policy, Aidan Davis told CBS MoneyWatch.
In response to pressure from labor unions, the House of Representatives enacted a one-year extension of the Build Back Better Act.
How to get credit for work done
In order to determine if a taxpayer is eligible for the Earned Income Tax Credit (EITC), most commercial tax software programs will ask them a few questions about their income.
There should be no financial obligation on the part of taxpayers to claim the credit. There are hundreds of volunteer-run tax preparation locations across the country where anyone with a low enough income can also file their tax forms for free under the IRS’ Free File program.
The EITC is included in Form 1040, therefore there is no need to use Free File Fillable Forms if you are filing on paper. Schedule EIC must also be filed by taxpayers who have children.)
In addition, many states offer tax relief for earned income.
In addition to the federal Earned Income Tax Credit, most states have enacted their own. Additional state tax credits are available in 28 states and the District of Columbia for citizens this year.
When it comes to the incomes and types of households who are eligible for state credit, there is a wide range of options available. Earned Income Tax Credit (EITC) benefits vary by state, however, in Montana, the EITC can add 3% to the value of a worker’s federal credit or double the amount of the credit (for childless workers in Washington, D.C.)