From Progress to Permanence and Beyond: Strengthening Virginia’s EITC

Every family in every community deserves to comfortably live on their income, meet the immediate needs of their family, and invest in what brings them joy and enriches their lives. Whether it’s food, a music lesson, rent, or a family outing, spending on family well-being should not feel burdensome. However, many families are struggling to get by, and their jobs pay too little to afford their basic needs. And many policy choices are making it harder — food prices are growing faster than other rising costs, health care premiums for employer-sponsored plans are increasing, and many families could be priced out of health care since federal lawmakers have failed to extend enhanced premium tax credits.

Virginia lawmakers should advance several policies to make Virginia a more affordable place to live, including refundable tax credits, which play a key role in getting more cash back to families. Advocates and state lawmakers made recent progress to improve our state’s Earned Income Tax Credit (EITC). Lawmakers can continue to build upon this work by continuing to increase as well as expand access to our refundable state EITC to help this important program reach more families and provide greater benefits in a time laced with economic uncertainty.

Celebrating and Protecting Progress

For decades, the refundable federal EITC has boosted incomes to help families better meet their needs and has lifted many low-income families above the poverty line. Families in every corner of Virginia use the federal credit and are eligible to claim the state version. 

Virginia has long had a state EITC valued at 20% of the federal credit. However, it was nonrefundable, blocking many families whose incomes are too low for them to owe much or any income tax from accessing the full state EITC benefit. After many years of advocacy, lawmakers added a smaller, but refundable EITC option in 2022 at 15% of the federal credit. Though many families were still blocked from receiving the full 20% value offered by the nonrefundable credit, they could now access more of the credit available to them, since the 15% refundable option could exceed how much income tax they owed. Advocates and lawmakers made history again in 2025, when they won a 20% refundable EITC in the budget through 2026. 

Because of this critical win, more families will be able to get more cash back through the state EITC and use it to help keep the lights on, put food on the table, pay for rent, or however they best see fit to help meet their family’s unique needs. Consider a single mother with two children who works full-time as a home health aid and makes the average annual salary for her profession in Virginia ($31,430). When she files her 2025 Virginia income tax return, she’ll get a state EITC of $1,090 — without refundability, this would have been $204 less.

The 20% refundable credit is a significant improvement for many Virginia families. However, it is set to expire after 2026, putting the many families who benefit from this improvement at risk. Lawmakers will need to act soon to extend the refundable credit or make this measure permanent. Without legislative action in the upcoming budget, many lower-income working families who benefit from the refundable EITC will see a tax increase. Luckily, there appears to be a number of legislative initiatives to make this meaningful policy choice permanent. Lawmakers should prioritize passing legislation and approving a budget that does so.

Beyond a Permanent Credit: Where We Can Go from Here

While Virginia has made significant progress in improving its EITC, there is more we can do to further the credit’s impact on family incomes. In addition to making the 20% refundable credit permanent, Virginia can learn from the success of other states by increasing the state credit level, increasing the benefit for working families with no children, and allowing families who file with individual taxpayer identification numbers (ITIN) to access the state EITC. 

Increase the State Credit Level.

Making the refundable EITC 20% of the federal credit puts meaningful dollars back into the pockets of Virginia’s working families. As rent, food, and other family needs have become increasingly unaffordable, lawmakers should consider increasing the level of the refundable EITC, getting more dollars back to families. Out of the 24 states and D.C. with a refundable EITC modeled on the federal credit, 12 have a refundable EITC above 20% of the federal credit. 

Even bumping the credit up to 25% of the federal credit could mean more dollars for families. For the single mother with two children working as a home health aide and making the average annual income for her position ($31,430), a 25% refundable EITC would mean $273 more back at tax time.

Increase the Level for Families with no Children.

The ability of the federal EITC to lift families out of poverty was intentionally targeted to families with children. The federal EITC for workers without children was originally intended to offset a gas tax increase. These different approaches are apparent in the credit size. For tax year 2025, the maximum credit for married and single filers with no children is $649. For one child, this jumps to $4,328, more than 6.5 times greater. For two children, this increases to $7,152. For families with 3 or more children, this goes up to $8,046. 

Working people at every stage of life deserve a fair shot at making ends meet. Some states have started to address the discrepancy in these EITC approaches by offering larger refundable state EITCs for workers without children. Maine offers a state credit at 50% of the federal credit for workers without dependent children, compared to 25% with dependent children. Maryland workers without dependents qualify for 100% of the federal EITC, while workers with dependent children get 50% of the federal credit.

Increasing Virginia’s EITC for workers without children to 100% of the federal credit would provide a significant boost to many households. The maximum credit for workers without children in Virginia in 2025, at the 20% level, is about $130. A 100% state-level credit would provide a maximum $649 credit, 5 times larger than the current credit, but still smaller than the refundable 20% level for families with children (about $866 for families with one child in 2025).

Allow Families who File with ITINs to get State EITC.

Despite paying taxes and being active contributors to their communities, families who file their taxes using an Individual Taxpayer Identification Number (ITIN) rather than a Social Security Number (SSN) are barred from accessing the federal EITC. Ten states, including Maryland, as well as D.C. have improved their state EITCs to include immigrant families who pay taxes with an ITIN who would otherwise qualify for the federal credit. Virginia can follow their example and include our immigrant neighbors in the state’s refundable EITC.

Build on Progress

Faced with rising costs, the refundable EITC is a critical tool to get cash back into the pockets of working families. Lawmakers will need to act quickly to protect this critical choice and, at a minimum, extend it or make it permanent. As lawmakers consider ways to make Virginia a more affordable place to live, they should build on their progress to improve the state’s refundable EITC and make it more accessible.

Category:
Economic Opportunity