Earned Income Tax Credit

  • Description
  • Funding History
  • Proposals

The state Earned Income Tax Credit (EITC) is a refundable tax break provided by the Commonwealth to lower-income workers in order to increase the after-tax rewards to work. It is available only to tax filers with earned income and provides benefits primarily to workers with children.

The Massachusetts EITC operates under the same eligibility rules as the federal EITC. The state credit amount is calculated as a straight percentage (also called the “match rate”) of the federal EITC amount claimed by the tax filer. On January 1st, 2016, the match rate was increased from 15 percent to 23 percent. A tax filer's federal EITC eligibility and credit value depend on marital status, the amount of income the filer(s) has/have earned during the tax year, and the number of dependent children the filer(s) claim. In general, qualifying children must be below age 19, but for a child who is a full-time student the qualifying age rises to 24, and children with certain disabilities qualify regardless of age.

The largest credits are provided to filers earning between approximately $14,000 and $24,000 a year (in 2016), and who have three or more children. The value of the credit declines slowly as family income rises and disappears entirely for families earning more than about $45,000-$55,000, depending on marriage/filing status. Far smaller credits are available to very low-income filers who do not have children. The value of the credit is applied toward the filer's tax liability and any amount that exceeds taxes owed is refunded to the filer through direct payment from the Commonwealth.

In 2016, the maximum value of the Massachusetts EITC will be $1,442. Typically, between 430,000 and 440,000 filers claim the Massachusetts state EITC each year. With the higher match rate (23 percent), the total cost of the program will be approximately $220 million annually.

Updated August 2016

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