Understanding Tax Credits

The Earned Income Tax Credit (EITC) is a tax credit for people who have earned a low to moderate income. EITC is the #1 antipoverty program in the U.S. As of December 2020, approximately 25 million eligible workers and families nationwide received roughly $62 billion back from the EITC.

Eligible tax filers can receive up to $7,430 depending on income and family size.

For the 2023 tax year, to qualify for the EITC, you must:

• File a federal income tax return
• Have earned income under $63,398
• Have investment income below $11,000
• Have a valid Social Security number by the due date of your 2023 return (including extensions)
• Be a U.S. citizen or a resident alien all year
• Meet certain rules if you are separated from your spouse and not filing a joint tax return
• If you are single without any dependents, you must be at least 25 years old, but under 65 as of December 31

Ineligible for the EITC:

• Form 2555, Foreign Earned Income
• Individual taxpayer identification numbers (ITIN)
• Adoption taxpayer identification numbers (ATIN)
• Social Security numbers on Social Security cards that have the words, “Not Valid for Employment,” on them

If you’re unsure if you qualify for the EITC, use this IRS screener tool.

NOTE: The EITC has special qualifying rules for Military members, Clergy members, Taxpayers and their relatives with disabilities.

For the 2023 tax year, to qualify for the EITC, you can use one of the following statuses:

• Married filing jointly
• Head of household
• Qualifying surviving spouse
• Single
• Married filing separate if you had a qualifying child who lived with you for more than half of 2023, and either of the following apply. You lived apart from your spouse for the last 6 months of 2023, or you are legally separated according to your state law under a written separation agreement or a decree of separate maintenance and you didn’t live in the same  household as your spouse at the end of 2023.

Like the federal Earned Income Tax Credit, the California Earned Income Tax Credit (CalEITC) is a tax credit, but available exclusively to Californians — including Individual Tax Identification Number (ITIN) holders. An estimated 3 million California families and individuals qualified for the credit in 2021.

Eligible tax filers can receive up to $3,529 depending on their income and family size.

You must file a state tax return and:

• Have earned income ($1-$30,950)
• File with a valid SSN or ITIN
• Lived in California for at least half the tax year
• Are at least 18 years old or have a qualifying child
• Married/registered domestic partner (RDP) filing separately filers must meet all of the following requirements:
  • Had a qualifying child who lived with you for more than half of the tax year, and:
    • You lived apart from your spouse/RDP for the last 6 months of the tax year, or
    • You are legally separated by state law under a written separation agreement or a decree of separate maintenance and you did not live in the same household as your spouse/RDP at the end of the tax year
• You cannot be: 
  • Be claimed as a qualifying child of another taxpayer
  • Be claimed as a dependent of another person unless you have a qualifying child

What else you should know:

• You may go back up to four years to claim CalEITC by filing or amending a state income tax return.
• You do not have to have a child to qualify for CalEITC, unless you are under 18 years old.

The Child Tax Credit (CTC) is a tax benefit granted for parents of qualifying children. Many changes to the child tax credit (CTC) for 2021 implemented by the American Rescue Plan Act of 2021, have expired. For the 2023 tax year, the Child Tax Credit is up to $2,000 per qualifying child. The exact amount a family receives is based on income and the number of qualifying children you claim on your tax return. The CTC is generally a nonrefundable credit; however, certain taxpayers may be entitled to a partial refund of the credit (limited to $1,600 per qualifying child) through the Additional Child Tax Credit (ACTC)

To qualify, you must:

• Have a qualifying child who was under 17 at the end of 2022 with a Social Security Number valid for employment, and who provided no more than half of their own financial support and lived with the tax filer claiming the credit for more than half the tax year
• Have taxable income of $400,000 or less if you are married and filing a joint return OR
• Have taxable income of $200,000 or less for all other filing statuses

What else you should know:

• Only one person can claim a child. We encourage people to have conversations with family members before it’s time to file. 
• Even if you aren’t required to file taxes, you can still receive your Child Tax Credit benefits.
• Parents who are ITIN holders can claim the federal Child Tax Credit (CTC) until 2025, if they have a qualifying child with a valid SSN.

The Young Child Tax Credit is a benefit available exclusively to California families with young children who also qualify for the California Earned Income Tax Credit (CalEITC). 

Eligible households can receive up to $1,117. 

To qualify, you must:

• Must file a state return
• Qualifies for CalEITC (income requirement is an exception)
  • No more than $30,931 in earned income
  • For tax year 2022 forward, no earned income is required and you may have a net loss of as much as $33,497 if you otherwise meet the CalEITC requirements
  • Has at least one child under age 6 at the end of the tax year

What else you should know:

• For tax year 2022 forward, you may qualify for YCTC with total earned income of zero dollars or less provided all the following apply:
  • Your total wages, salaries, tips, and other employee compensation (whether subject to California withholding or not), if any, do not exceed $32,490
  • Your total net loss does not exceed $32,490, and
  • You otherwise meet the CalEITC and YCTC requirements
• Only one person can claim a child. We encourage people to have conversations with family members before it’s time to file.
• ITIN holders are eligible to receive this credit.