earned income tax credit

Definition

A relief from the Social Security tax for working, low-income individuals. Congress originally approved the tax credit in 1975 to offset the burden of Social Security taxes and to provide an incentive to work. The amount of the tax credit depends upon the number of qualifying children (if any), as well as the income of the parent or guardian. To receive the credit, an individual must file a tax return. This credit does not typically have any impact on other programs such as Medicaid or welfare.

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You should always have your accountants looking for any earned income tax credit that you may be able to get.

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The earned income tax credit was very useful for the lower income individuals who are able to take advantage of it.

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A combination of the saver's credit and the Earned Income Tax Credit was able to get Fred a negative income tax rate, but he still had to pay his payroll taxes.

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