December 13, 2018
Understanding the Earned Income Tax Credit and How Virginia Can Improve Its State Credit
About the EITC
A family must be earning income to be eligible for the EITC. And for families earning low wages and struggling to make ends meet, the EITC is an economic boost.
The EITC supports Virginia’s working families.
The EITC is one of the most effective anti-poverty tools.
Part of what makes the federal EITC effective is that it’s refundable – meaning that if the earned credit is larger than the income tax owed, the remainder of the credit is refunded.
This helps families to be able to better afford things like child care and reliable transportation to work.
The tapered design of the EITC ensures that a family is rewarded for work and does not suddenly lose the boost the credit provides just for earning a little bit more.
The EITC benefits families in every city and county in Virginia, with the biggest boost going to struggling communities.
EITC refunds put money in the pockets of many hard-working Virginians and into local economies.
One survey found that nearly one third of EITC refund dollars were spent on current consumption such as groceries, child expenses, household needs like refrigerators and washing machines, and other everyday needs. Just over one quarter was initially saved or spent on larger needs like car or home purchase or repair, or education expenses.
Just over forty percent of refund dollars were spent on bills or helping a family get out of medical, student loan, and other debt.
The EITC is more than an economic boost. It is a long-term investment in health, education, and more.
The EITC is a work support and can boost the ability of individuals to move up in their careers.
Research shows that when people have taken advantage of the federal EITC and state EITC supplements in the past, they often can’t claim the credits within two years because their earnings increase too much!
Keep reading to learn how Virginia can improve it’s earned income tax credit
