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 2020, 28 states and the District of Columbia offer their own EITC, typically calculated as a percentage of the federal credit.
In 2020, 28 states and the District of Columbia offer an EITC. Washington, a state without an individual income tax, has an EITC in its tax code but it has never been implemented or funded. North Carolina eliminated its EITC in 2014.
State EITCs are refundable, like the federal credit, in all but six states: Delaware, Hawaii, 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 states with a credit set their EITC as a percentage of the federal credit, except for Minnesota, which calculates its credit as a percentage of income. In tax year 2019, state credits ranged from 3 percent of the federal EITC in Montana to a nonrefundable 41.67 percent of the federal credit in South Carolina. The highest refundable credit is in the District of Columbia (40 percent). California's credit is 85 percent but it applies to a smaller range of eligible income than the other state credits.
The District of Columbia also 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 also increased its EITC match specifically for earners without qualifying children.
Meanwhile, California, Maine, and Maryland are the first states to make residents ages 18 to 24 without qualifying children eligible for their state credit. 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.
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.
California’s credit is 85 percent of the federal credit but is based on a smaller earnings range of income (up to $30,000, if there is one or more qualifying children) than the federal EITC (up to $56,844, if the filer is married with three or more qualifying children).
State earned income tax credits as percentage of federal credit, tax year 2019
- 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% (or 50% nonrefundable)
- Massachusetts: 30%
- Michigan: 6%
- Minnesota: calculated as a percentage of income
- Montana: 3%
- Nebraska: 10%
- New Jersey: 39%
- 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: 41.67% (nonrefundable)
- Vermont: 36%
- Virginia: 20% (nonrefundable)
- Wisconsin: 4% one child; 11% two children; and 34% three or more children
Sources: State tax codes and Tax Credits for Working Families
Washington is currently the only state that does not tax individual income but has enacted a state EITC. However, its credit has never been funded or implemented. If it were funded, eligible Washington residents would file an application for the credit along with the previous year’s federal return (e.g., an application in tax year 2019 would be based on the federal EITC granted for tax year 2018).
What is the earned income tax credit?
Tax Policy Center Briefing Book
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)