State Earned Income Tax Credits
The federal earned income tax credit (EITC) provides a refundable credit to taxpayers based on their income and family circumstances (such as marital status and number of children). In 2021, 28 states and the District of Columbia offer their own EITC, typically calculated as a percentage of the federal credit.
- How do state EITCs differ?
- Can states that don’t tax income offer an EITC?
- How did the American Rescue Plan affect state EITCs?
- Further reading
In 2021, 28 states and the District of Columbia offer an EITC. Missouri and Washington both passed legislation in 2021 enacting a state EITC that takes effect in 2023. North Carolina eliminated its EITC in 2014.
State EITCs are refundable, like the federal credit, in all but seven states: Delaware, Hawaii, Missouri, Ohio, Oklahoma, South Carolina, and Virginia. If a refundable credit exceeds a taxpayer’s state income tax, the taxpayer receives the excess amount as a payment from the state. In that way, a refundable EITC can offset other state taxes like general sales taxes. A nonrefundable EITC can offset state income taxes but no other state-level taxes paid by low-income working families.
The District of Columbia and all but two states with a credit set their EITC as a percentage of the federal credit. (Minnesota and Washington calculate their credits as a percentage of income.) In tax year 2021, state credits ranged from 3 percent of the federal EITC in Montana to a nonrefundable 83.33 percent of the federal credit in South Carolina. The highest refundable credit is in New Jersey and the District of Columbia (40 percent in both). Maryland's refundable credit is 45 percent for tax years 2020 through 2022, but in tax year 2023 the state's match returns to its previous rate of 28 percent.
California’s credit is 85 percent of the federal credit but is based on a smaller range of income (up to $30,000, if there is one or more qualifying children) than the federal EITC (up to $57,414, if the filer is married with three or more qualifying children). Wisconsin's EITC depends on the number of qualified children: it is 4 percent of the federal credit for filers with one child, 11 percent for filers with two children, and 34 percent for filers with three or more children. Wisconsin filer's without qualifying children cannot claim the state credit.
Setting the state EITC as a percentage of the federal credit makes calculations simple for both filers and state administrators. However, states are increasingly decoupling from the federal rules and making other changes to their state credits to further assist certain types of workers.
For example, the District of Columbia offers 100 percent of the federal EITC to earners without qualifying children, and expanded the range of eligible income for these filers beyond the federal limits. Maine and Maryland also increased their EITC match specifically for workers without qualifying children. (Maryland's change is temporary, though.) Prior to the American Rescue Plan (ARP), few childless workers were eligible for federal EITC and those who were received only a fraction of the benefits available to workers with children. Thus, these state EITC reforms were an effort to assist these workers beyond the federal rules. The ARP tripled the federal EITC for childless workers but only for tax year 2021 (see the section on the ARP).
Meanwhile, California, Maine, and Maryland are the first states to make residents ages 18 to 24 without qualifying children eligible for their state credit. To claim the federal EITC, a filer without qualifying children must be at least age 25. Minnesota allows filers without qualifying children ages 21 to 24 to claim the credit. To claim the federal credit, and all other state credits, a filer without qualifying children must be at least age 25.
Oregon follows the federal rules but offers a higher match rate for filers with children under the age of three.
In 2020, California and Colorado became the first states to allow workers without a Social Security number to claim their state’s credit. These workers, who file taxes with an individual taxpayer identification number (ITIN), are not eligible to claim the federal EITC. In 2021, Maryland, New Mexico, and Washington also passed legislation making ITIN filers eligible for their states' credit.
State earned income tax credits as percentage of federal credit, tax year 2021
- California: 85% (applies to a smaller range of eligible income than the federal credit)
- Colorado: 10%
- Connecticut: 23%
- Delaware: 20% (nonrefundable)
- District of Columbia: 40% (100% for childless workers)
- Hawaii: 20% (nonrefundable)
- Illinois: 18%
- Indiana: 9%
- Iowa: 15%
- Kansas: 17%
- Louisiana: 5%
- Maine: 12% (25% for childless workers)
- Maryland: 28% refundable or 50% nonrefundable (Maryland's refundable EITC is set at 100% for childless workers and at 45% for all other workers for tax years 2020 through 2022)
- Massachusetts: 30%
- Michigan: 6%
- Minnesota: calculated as a percentage of income
- Missouri: 10% (starting 2023)
- Montana: 3%
- Nebraska: 10%
- New Jersey: 40%
- New Mexico: 17%
- New York: 30%
- Ohio: 30% (nonrefundable)
- Oklahoma: 5% (nonrefundable)
- Oregon: 9% (12% for families with dependents under the age of three)
- Rhode Island: 15%
- South Carolina: 83.33% (nonrefundable)
- Vermont: 36%
- Virginia: 20% (nonrefundable)
- Washington: calculated as a percentage of income (starting 2023)
- Wisconsin: 4% one child; 11% two children; and 34% three or more children
Sources: State tax codes and Tax Credits for Working Families
In 2021, Washington became the first state without an individual income tax to enact a state EITC. Once the credit takes effect in 2023, eligible Washington residents will file an application to the state for the credit along with their federal individual income tax return. Filers who are eligible for the federal EITC are also eligible for the Washington EITC, with the state credit amount based on the filer's income and family size.
The American Rescue Plan (ARP) included a temporary, one-year expansion of the federal EITC for childless workers. In tax year 2021, the ARP roughly triples the maximum credit available to childless workers from $538 to $1,502, and increases the range of eligible income for these filers. These federal changes to the EITC will also trigger automatic increases to the 25 state EITCs that are calculated as a percentage of the federal credit. This is particularly true in the District of Columbia, Maine, and Maryland, which give childless workers a higher percentage match than other workers in their calculation of state EITCs. The Tax Policy Center estimates that 4.6 million households will see an average state EITC increase of $153.
What is the earned income tax credit?
Tax Policy Center (2021)
How Increasing the Federal EITC and CTC Could Affect State Taxes
Elaine Maag and David Weiner (2021)
Extending the California Earned Income Tax Credit to Postsecondary Students
Elaine Maag and Nikhita Airi (2021)
District of Columbia Shows How to Expand the EITC For Childless Workers
Richard C. Auxier (2019)
Who Benefits from Expanding the EITC or CTC?
Elaine Maag (2018)
Upward Mobility and State-Level EITCs Evaluating California’s Earned Income Tax Credit
Kim S. Rueben, Frank Sammartino, and Kirk J. Stark (2017)