The Earned Income Tax Credit turns 50 years old today.
A component of the Tax Reduction Act, the EITC was signed into law by President Gerald Ford on March 29, 1975.
“What began as a modest means to provide financial help to working families has evolved through a series of legislative changes into one of the federal government’s largest anti-poverty programs,” said the IRS, which added that the tax credit has played a crucial role in helping millions of low- to moderate-income workers out of poverty in the past 50 years.
Approximately 23 million workers and families received about $64 billion from the EITC last year, according to the IRS.
In 1975, the maximum credit amount for the EITC was $400. For tax year 2024, the EITC can be up to $7,830. That maximum credit amount will increase to $8,046 for tax year 2025.
“Today, the EITC continues to provide financial assistance to low- to moderate-income working families and individuals, with or without children, by helping them cover essentials, save for the future, and build financial stability,” the IRS said.
But despite its longevity, the EITC is still one of the biggest tax breaks that families overlook when filing their taxes.
“Nearly 20% of those eligible do not claim the credit. Even though in 2023, the average credit was $2,743,” Chris Burns, CPA, CFA, CFP, vice president and assistant director of research with Greenleaf Trust, told GOBankingRates recently.
Taxpayers can use the EITC Assistant to determine their eligibility. Those that are eligible can learn how to claim the credit on IRS.gov.
Thanks for reading CPA Practice Advisor!
Subscribe Already registered? Log In
Need more information? Read the FAQs
