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Earned Income Tax Credit Peak & Phase Outs

February 04, 2025

The Earned Income Tax Credit (EITC) peaks at a certain income level and then phases out as income continues to rise. This "phase-out" range depends on your filing status and the number of qualifying children. Here's how it works for 2023:

1. EITC for a Married Couple Filing Jointly (with one child):

  • Peak of the Credit:
    For a married couple with one child, the EITC reaches its maximum value at $19,530 in earned income. After this point, the credit begins to phase out.

  • Phase-Out Range:

    • The credit starts phasing out once the couple's earned income reaches $25,000.

    • The phase-out continues until $53,120 in earned income, which is the upper limit for a married couple with one child. After this income level, the credit is completely phased out.

2. EITC for Other Filing Statuses:

If you're not married or have a different number of children, the income ranges for the EITC will change:

  • Single or Head of Household:

    • One child:

      • Peaks at: $19,530 earned income

      • Phase-out begins at $25,000 and ends at $48,650.

    • Two children:

      • Peaks at: $22,410 earned income

      • Phase-out begins at $25,000 and ends at $53,120.

    • Three or more children:

      • Peaks at: $24,370 earned income

      • Phase-out begins at $25,000 and ends at $56,410.

3. Maximum EITC Amounts for 2023:

  • One child: The maximum EITC a married couple can receive with one child is about $3,995.

  • Two children: The maximum is about $6,604.

  • Three or more children: The maximum is about $7,430.

Summary:

For a married couple with one child, the EITC peaks at an income of $19,530, and the credit phases out completely by $53,120. At the peak, you get the maximum EITC of about $3,995, which then decreases as income rises above that point.

Great! Let's take a deeper look at the phase-out rates for the Earned Income Tax Credit (EITC) in 2023 and how they change based on filing status and the number of qualifying children.

1. Phase-Out Rates Explained

The EITC phases out as your earned income and adjusted gross income (AGI) increase beyond certain thresholds. The phase-out is gradual — the credit decreases by a fixed amount as income rises. Once the phase-out ends, you no longer receive any EITC.

Phase-Outs for 2023 (Married Filing Jointly)

For One Child:

  • Maximum EITC: $3,995

  • Earned Income to Peak: $19,530

  • Phase-Out Starts: At $25,000 earned income

  • Phase-Out Ends: At $53,120 earned income

  • Phase-Out Rate: 21.06% (meaning for every dollar earned beyond the phase-out starting point, you lose 21.06 cents of the credit).

Example:

  • If you earn $30,000, you'll lose a portion of your EITC, but still receive a smaller amount, since you’re in the phase-out range.

  • If you earn $53,120, your EITC will be reduced to zero.

For Two Children:

  • Maximum EITC: $6,604

  • Earned Income to Peak: $22,410

  • Phase-Out Starts: At $25,000 earned income

  • Phase-Out Ends: At $58,000 earned income

  • Phase-Out Rate: 21.06%

Example:

  • If you earn $40,000, the credit will start to phase out, reducing the total amount.

  • If you reach $58,000, you will no longer qualify for any EITC.

For Three or More Children:

  • Maximum EITC: $7,430

  • Earned Income to Peak: $24,370

  • Phase-Out Starts: At $25,000 earned income

  • Phase-Out Ends: At $63,500 earned income

  • Phase-Out Rate: 21.06%

Example:

  • If you earn $50,000, your credit will be reduced according to the phase-out rate.

  • Once you hit $63,500, you will have no more EITC.

For Single or Head of Household Filers

For One Child:

  • Maximum EITC: $3,995

  • Earned Income to Peak: $19,530

  • Phase-Out Starts: At $25,000 earned income

  • Phase-Out Ends: At $48,650 earned income

  • Phase-Out Rate: 21.06%

For Two Children:

  • Maximum EITC: $6,604

  • Earned Income to Peak: $22,410

  • Phase-Out Starts: At $25,000 earned income

  • Phase-Out Ends: At $53,120 earned income

  • Phase-Out Rate: 21.06%

For Three or More Children:

  • Maximum EITC: $7,430

  • Earned Income to Peak: $24,370

  • Phase-Out Starts: At $25,000 earned income

  • Phase-Out Ends: At $56,410 earned income

  • Phase-Out Rate: 21.06%

How the Phase-Out Works:

Let's take an example of a married couple with one child earning $30,000:

  1. Base EITC: First, you calculate the maximum credit. In this case, with one child and $30,000 of earned income, the couple will have a partial EITC because they are in the phase-out range. The full amount of the credit would be $3,995, but since their income exceeds $19,530, they lose part of it.

  2. Phase-Out Calculation:

    • The phase-out begins at $25,000. So, the couple's $30,000 of earned income is $5,000 over the threshold.

    • The credit reduces by 21.06% for every dollar over $25,000.

    • $5,000 x 21.06% = $1,053

    • The original credit of $3,995 is reduced by $1,053, resulting in an EITC of $2,942.

  3. Total EITC for $30,000 earned income: $2,942 (instead of the full $3,995).

Key Takeaways:

  • The EITC peaks at specific income thresholds, which vary by the number of children and filing status.

  • Phase-out starts once your income exceeds a certain level (e.g., $25,000 for a married couple with one child) and continues until the credit is completely phased out.

  • The phase-out rate is 21.06% (for all filing statuses), meaning you lose a percentage of your EITC as your income rises within the phase-out range.

EITC - The Earnest Income Tax Credit