What Is Earned Income Tax Credit?

The earned income tax credit, known as the EITC, is a tax benefit for certain people who earn low to moderate income, explains the IRS. The EITC reduces the amount of tax owed. The reduction in tax obligation resulting from the EITC may entitle a person to a tax refund.

The EITC is equal to a fixed percentage of earnings from the first dollar of earnings, according to the Tax Policy Center. The EITC has a maximum rate determined by the number of children in a family. In 2014, the cap on the value of the EITC for families with three or more children was $6,143. The maximum credit was $5,460 for families with two children, $3,305 for those with one and $496 for childless families.