Understanding the Earned Income Tax Credit and How Virginia Can Improve Its State Credit

Of states that have enacted an EITC, Virginia is just one of a few that do not give the full value of the credit to all families who have earned it.

Virginia’s state EITC – equal to 20 percent of the federal credit – piggy-backs on the federal EITC and helps offset state and local taxes such as sales and property taxes.

Right now, the federal refundable EITC helps a broad range of people. Virginia’s corresponding credit, however, is more limited.

Working families who will benefit from a refundable credit will receive a few hundred dollars on average.

What may seem like a small amount can be the difference between having the funds to fix a car to get to work or losing a job.

If Virginia’s EITC were refundable, it could boost the benefits of work for families with children and help offset other state and local taxes, like sales and gas taxes, that we know working families pay.

The EITC helps families afford the necessities like child care, and these credits are a critical tool to boost women’s long-term economic prospects.

Families with low incomes spend more of what they earn on the basics, and they spend it locally.

If the EITC was refundable, even more EITC dollars would be going into businesses in small and rural communities.