The earned income tax credit is a federal tax credit afforded to lower- and moderate-income earners. Eligibility for the credit varies based on filing status and income levels. As of the 2019 tax year, families could be eligible for the earned income tax credit with incomes up to approximately $56,000.
The amount of the credit is based on the family size. While the 2019 credit for individuals was $529, families with three or more children were eligible for tax credits of $6,577. These amounts are indexed for inflation and so change annually.
The extent of the credit is such that people who are eligible often pay “negative” income taxes, which means that their credits are greater than their federal income taxes owed, resulting in their “refunds” being greater than the total amount of federal income tax withheld.
Some economists have argued that the earned income tax credit is, in fact, more effective at reducing poverty even than higher minimum wages.