Understanding the Earned Income Tax Credit

You know you are rich if taxes are the biggest financial burden you must bear.  For the rest of us, income tax refunds are the only financial relief we get.  Throughout the year, our paychecks get eaten up by the fees charged by the debit cards onto which our employers load our pay because we can’t open a bank account, by the high prices at the supermarkets, or the convenience stores where we shop because the supermarkets are too far away, and, increasingly, by the late fees that pile up on our buy now pay later (BNPL) bills when, out of necessity, we make new BNPL purchases before paying off the old ones.  We look forward to filing income taxes, because our tax refund gives us a fleeting feeling that, at least for now, we have more money than the meager amount which we must use our ingenuity to stretch until the next pay period.  Of course, you know you are poor when you don’t even make enough money for the IRS to bother assessing taxes on it.  You might qualify for a bigger tax refund than you realize.  For help using your tax refund in ways that will bring the greatest and most lasting financial relief, contact a Philadelphia debt relief lawyer.

Do You Qualify for the Earned Income Tax Credit?

A tax credit is different from a tax deduction.  A tax deduction is an amount that the IRS subtracts from your taxable income before calculating how much you owe.  A tax credit is an amount the IRS subtracts from the amount you owe.  The earned income tax credit (EITC) for the 2024 tax filing year varies according to your income and the number of dependents you are claiming on your tax return.  For example, if you are claiming one dependent, you qualify if your income is less than $49,084 if you are single and if it is less than $56,004 if you are married and you and your spouse are filing jointly.  The maximum amount that the EITC will add to your tax refund if you have one dependent child is $4,230.  If you have more children, the qualifying income threshold is higher, and so is the refund amount.

How to Claim the Earned Income Tax Credit

To get your EITC refund, you must file an income tax return.  You can file a return even if your income is so low that the IRS does not require you to file one, and in this case, you can still get a tax refund.

Now That You Have Your Tax Refund, How Will You Spend It?

Once the tax refund is in your possession, the sky is the limit.  You can use it to file for bankruptcy, pay down debt, or open a savings account, or you can just let it be a financial cushion that helps you feel, at least for the next few pay periods, that you are doing more than simply living paycheck to paycheck.

Contact CONSUMERLAWPA.com About Looking on the Bright Side at Tax Time

A Philadelphia consumer law attorney can help you make this tax season a new beginning.  Contact  CONSUMERLAWPA.com to set up a free, confidential consultation.

Sources:

irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-and-earned-income-tax-credit-eitc-tables

cnbc.com/2025/02/06/low-income-tax-refunds.html