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Wednesday, February 13, 2013

The Earned Income Tax Credit (EITC): Changes for 2012 and 2013



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 will be higher in 2012 and 2013 than it was in 2011. 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 2012, the maximum EITC for tax filers without children was $475, and it will increase to $487 in 2013. For families with one child, the maximum credit was $3,169 in tax year 2012, and it will increase to $3,250 in 2013. For families with two children, in tax year 2012 the maximum was $5,236, and it will increase to $5,372 in 2013.

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.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) extended the new category for three or more children to tax years 2011 and 2012. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) extended the ARRA provisions for families with three or more children and marriage penalty relief for five years (through tax year 2017). For families with three or more children, the maximum credit was $5,751 in tax year 2011, $5,891 in tax year 2012, and will be $6,044 in tax year 2013.

Beginning in tax year 2008, the phase-out level for married couples filing a joint tax return was $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, and inflation adjusted the amount for tax year 2010.

P.L. 111-312 extended the higher phase-out level to tax years 2011 and 2012. In tax year 2011, the phase-out level for married couples was $5,080 higher than for unmarried taxpayers, $5,210 higher in tax year 2012, and in tax year 2013, it will be $5,340 higher than for unmarried taxpayers.



Date of Report: January 31, 2013
Number of Pages: 6
Order Number: RS21352
Price: $19.95

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