What is the Earned income credit?
The Earned Income Credit (EIC) is a refundable federal tax credit designed to provide financial assistance to working individuals and families with low to moderate incomes. The credit amount depends on earned income levels, filing status, and the number of qualifying children claimed on the tax return. Unlike non-refundable credits that only reduce tax liability to zero, the earned income credit can result in tax refunds even when no income tax was withheld from paychecks. Strategic planning often coordinates the earned income credit with Child & dependent tax credits to maximize overall family tax benefits.
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