Earned Income Credit Calculator

Earned Income Credit Calculator (2023)

(Wages, salaries, tips, net earnings from self-employment)

(Your total income minus certain deductions)

0 1 2 3 or more (Children who meet age, relationship, and residency tests)

(Must be $11,000 or less for 2023)

function calculateEITC() { var earnedIncome = parseFloat(document.getElementById('earnedIncome').value); var agi = parseFloat(document.getElementById('adjustedGrossIncome').value); var numChildren = parseInt(document.getElementById('numChildren').value); var filingStatus = document.querySelector('input[name="filingStatus"]:checked').value; var investmentIncome = parseFloat(document.getElementById('investmentIncome').value); var resultDiv = document.getElementById('eitcResult'); // — Input Validation — if (isNaN(earnedIncome) || earnedIncome < 0) { resultDiv.innerHTML = "Please enter a valid non-negative number for Total Earned Income."; resultDiv.style.backgroundColor = '#f8d7da'; resultDiv.style.borderColor = '#f5c6cb'; resultDiv.style.color = '#721c24'; return; } if (isNaN(agi) || agi < 0) { resultDiv.innerHTML = "Please enter a valid non-negative number for Adjusted Gross Income (AGI)."; resultDiv.style.backgroundColor = '#f8d7da'; resultDiv.style.borderColor = '#f5c6cb'; resultDiv.style.color = '#721c24'; return; } if (isNaN(investmentIncome) || investmentIncome investmentIncomeLimit) { ineligibleReason = "Your investment income exceeds the limit of $" + investmentIncomeLimit.toLocaleString() + "."; } else if (agi >= currentPhaseOutEndAGI) { ineligibleReason = "Your Adjusted Gross Income (AGI) is too high for your filing status and number of children."; } else if (earnedIncome > currentPhaseOutEndAGI && agi > currentPhaseOutEndAGI) { // If both earned income and AGI are above the max threshold ineligibleReason = "Your income is too high for your filing status and number of children."; } if (ineligibleReason !== "") { resultDiv.innerHTML = "Ineligible: " + ineligibleReason; resultDiv.style.backgroundColor = '#f8d7da'; resultDiv.style.borderColor = '#f5c6cb'; resultDiv.style.color = '#721c24'; return; } // — EITC Calculation — var creditBasedOnEarnedIncome = 0; var creditBasedOnAGI = 0; // 1. Calculate credit based on earned income (Phase-in) if (earnedIncome <= phaseInMaxIncome) { creditBasedOnEarnedIncome = earnedIncome * phaseInRate; } else { creditBasedOnEarnedIncome = maxCredit; } creditBasedOnEarnedIncome = Math.min(creditBasedOnEarnedIncome, maxCredit); // Cap at max credit // 2. Calculate credit based on AGI (Phase-out) if (agi currentPhaseOutStartAGI && agi < currentPhaseOutEndAGI) { creditBasedOnAGI = maxCredit – ((agi – currentPhaseOutStartAGI) * phaseOutRate); } else { // AGI is at or above the phase-out end creditBasedOnAGI = 0; } // The actual credit is the lesser of the two calculations, and cannot be negative var estimatedEITC = Math.max(0, Math.min(creditBasedOnEarnedIncome, creditBasedOnAGI)); resultDiv.innerHTML = "Estimated Earned Income Credit: $" + estimatedEITC.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }) + ""; resultDiv.style.backgroundColor = '#e9f7ef'; resultDiv.style.borderColor = '#d4edda'; resultDiv.style.color = '#155724'; } // Run calculation on load with default values document.addEventListener('DOMContentLoaded', calculateEITC);

Understanding the Earned Income Credit (EITC)

The Earned Income Tax Credit (EITC) is a refundable tax credit for low-to-moderate-income working individuals and families. It's designed to provide financial relief and encourage employment. Because it's a refundable credit, eligible individuals can receive a refund even if they don't owe any tax.

Who is Eligible for EITC?

Eligibility for the EITC depends on several factors, primarily your income, filing status, and whether you have qualifying children. Here are the key criteria:

• Earned Income: You must have earned income from employment or self-employment. This includes wages, salaries, tips, and net earnings from self-employment.
• Adjusted Gross Income (AGI): Your AGI must be below certain thresholds, which vary based on your filing status and the number of qualifying children.
• Qualifying Children: While you can claim EITC without children, the credit amount is significantly higher for those with one or more qualifying children. A qualifying child must meet age, relationship, and residency tests.
• Filing Status: You must file as Single, Head of Household, Qualifying Widow(er), or Married Filing Jointly. You generally cannot claim EITC if you are Married Filing Separately.
• Investment Income: Your investment income (e.g., interest, dividends, capital gains) must be below a certain limit (e.g., $11,000 for 2023).
• Social Security Number: You, your spouse (if filing jointly), and any qualifying children must have a valid Social Security Number (SSN).
• U.S. Citizen or Resident Alien: You must be a U.S. citizen or a resident alien all year.

How the EITC is Calculated

The EITC calculation is based on a progressive system that involves "phase-in" and "phase-out" ranges:

1. Phase-in: As your earned income increases from zero, your EITC amount also increases at a specific rate until it reaches a maximum credit amount.
2. Maximum Credit: Once your earned income reaches a certain point, your EITC will be at its highest possible amount for your situation. This maximum credit varies significantly based on the number of qualifying children.
3. Phase-out: If your earned income or AGI exceeds a certain threshold, your EITC begins to decrease at a specific rate until it eventually reaches zero. This ensures the credit is targeted towards low-to-moderate-income individuals and families.

The specific income thresholds and credit rates are updated annually by the IRS. The calculator above uses the 2023 tax year figures for its estimations.

Why is EITC Important?

The EITC is one of the largest anti-poverty programs in the United States. It helps millions of working individuals and families by:

• Boosting household income, which can be used for essential needs like housing, food, and transportation.
• Encouraging work by supplementing the income of low-wage earners.
• Stimulating local economies as recipients spend their refunds.

Example Calculation (2023)

Let's consider a single parent with two qualifying children:

• Earned Income: $30,000
• Adjusted Gross Income (AGI): $30,000
• Number of Qualifying Children: 2
• Filing Status: Single
• Investment Income: $0

Based on 2023 rules for a single filer with two children:

• Maximum Credit: $6,604
• Phase-in Rate: 40%
• Phase-in Max Income: $16,510
• Phase-out Start AGI: $21,560
• Phase-out Rate: 21.06%
• Phase-out End AGI: $52,930

Step 1: Credit based on Earned Income (Phase-in)

Since $30,000 (earned income) is greater than $16,510 (phase-in max income), the credit based on earned income would be the maximum credit: $6,604.

Step 2: Credit based on AGI (Phase-out)

Since $30,000 (AGI) is between $21,560 (phase-out start) and $52,930 (phase-out end):

Phase-out amount = ($30,000 – $21,560) * 0.2106 = $8,440 * 0.2106 = $1,777.06

Credit based on AGI = $6,604 – $1,777.06 = $4,826.94

Step 3: Final EITC

The final EITC is the lesser of the two calculations: min($6,604, $4,826.94) = $4,826.94.

This example demonstrates how the credit phases out as income increases beyond the initial thresholds.

Disclaimer: This calculator provides an estimate based on the 2023 tax year rules and common scenarios. It is not tax advice. Actual EITC amounts can vary based on specific tax situations, additional eligibility requirements, and changes in tax law. Always consult with a qualified tax professional or refer to official IRS publications for accurate tax planning.