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Thursday, January 20, 2011

The Earned Income Tax Credit (EITC): Changes for 2010 and 2011

Christine Scott
Specialist in Social Policy

The earned income tax credit (EITC), established in the tax code in 1975, provides cash assistance to lower income working parents and individuals through the tax system. The EITC for will be higher in 2010 and 2011 than it was in 2009. An increase in the size of the EITC will occur because the maximum amount of earned income used to calculate the credit and the phaseout income level are indexed for inflation. The increases reflect the inflation adjustment.

For tax year 2010, the maximum EITC for tax filers without children was $457, and it will increase to $464 in 2011. For families with one child, the maximum credit was $3,050 in tax year 2010, and it will increase to $3,094 in 2011. For families with two children, in tax year 2010 the maximum was $5,036, and it will increase to $5,112 in 2011. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) created a new credit category, for families with three or more children for tax years 2009 and 2010. For families with three or more children, in tax year 2010, the maximum credit was $5,666.

Beginning in tax year 2008, the phase-out level for married couples filing a joint tax return is $3,000 higher than the level for other filers. ARRA increased the $3,000 differential for married couples to $5,000 for tax year 2009. In tax year 2010, this amount was adjusted for inflation, and was $5,010.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) extended the ARRA provisions for marriage penalty relief and the category for three or more children through tax year 2012. The phase-out level for married couples filing a joint tax return is $5,080 higher than for other tax filers. For families with three or more children, the maximum credit in 2011 is $5,751.

Date of Report: January 4, 2011
Number of Pages: 6
Order Number: RS21352
Price: $19.95

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