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The Earned Income Tax Credit and the Child Tax Credit are both programs designed to help alleviate poverty, but there are key differences. The EITC is a credit available to employed, low-income households. It is intended to boost the effective income of people who are employed. The CTC is a credit available to employed households with children. This credit is intended to help offset the costs of raising children. Both can be very valuable for qualifying taxpayers.
If you want help navigating taxes, consider working with a financial advisor.
What Is the Earned Income Tax Credit?
The Earned Income Tax Credit, or EITC, is a federal tax credit available to low-income households. This applies only to federal taxes, meaning that it is not available on state and municipal filings, although several states also offer their own version of this credit. You must file a tax return in order to claim the EITC.
As a tax credit, the EITC reduces your total tax liability on a dollar-to-dollar basis. This means that for every dollar of credit you receive, your taxes directly go down by that amount. (This is as opposed to a deduction, which only indirectly reduces your taxes by reducing the amount of income you get taxed on.) The EITC is also fully refundable, meaning that if it reduces your tax burden below $0 the IRS will send you a check for the difference.
Although intended as an anti-poverty measure, unemployed households do not qualify for the EITC. Instead, this credit has a minimum income requirement. This is known as the earned income requirement, or the “credit rate,” and is intended to encourage work.
How the Earned Income Tax Credit Works
The amount of this tax credit is based on a sliding scale: The more money you make (based on your filing status and income) the smaller your applicable tax credit. The amount you are eligible to receive depends on your income, your filing status (single, married or head of household) and how many children you claim on your taxes.
2025 Earned Income Tax Credit Limits
| Number of Children | Maximum Earnings for Singles, Married Filing Separately and Heads of Household | Maximum Earnings for Joint Filers | Maximum EITC |
|---|---|---|---|
| 0 | $19,104 | $26,214 | $649 |
| 1 | $50,434 | $57,554 | $4,328 |
| 2 | $57,310 | $64,430 | $7,152 |
| 3+ | $61,555 | $68,675 | $8,046 |
2026 Earned Income Tax Credit Limits
| Number of Children | Maximum Earnings for Singles, Married Filing Separately and Heads of Household | Maximum Earnings for Joint Filers | Maximum EITC |
|---|---|---|---|
| 0 | $19,540 | $26,820 | $664 |
| 1 | $51,593 | $58,863 | $4,427 |
| 2 | $58,629 | $65,899 | $7,316 |
| 3+ | $62,974 | $70,244 | $8,231 |
Households that file their taxes as married filing separately must meet certain special criteria to qualify for this tax credit. Typically, this filing status must have a qualifying child to claim the EITC. Meanwhile, the EITC is ordinarily very small for households without children.
The EITC phases in at a rate of 7.65% per dollar earned up until you reach the maximum amount of credit for your filing status. For example, say you earned $100. You would qualify for an earned income tax credit of $7.65 (since this is 7.65% of $100). In tax year 2025, as another example, a childless individual will receive their maximum EITC at $8,680 (since 7.65% of $8,680 is $664).
What Is the Child Tax Credit?
The Child Tax Credit, or CTC, is a federal tax credit designed to help families with children. As a federal tax credit the CTC only applies to your federal taxes, although many states run similar programs. You must file a tax return with the IRS in order to claim the CTC.
As a tax credit, this program reduces your total tax liability on a dollar-to-dollar basis. Your taxes directly go down for every dollar that you qualify for. There are two components to this:
- The CTC offers a non-refundable tax credit. This means that it can reduce your taxes to $0 (which can get you a refund check from the IRS based on what you’ve already paid in withholding). It cannot reduce your taxes below that amount.
- The Additional Child Tax Credit (ACTC) is a component of the CTC. It offers a partially refundable credit, which means that if your tax bill falls below $0 the IRS will send you a check to cover the difference.
Under pre-2025 rules, households could receive up to $2,000 per eligible child. The One Big Beautiful Bill Act (OBBBA) increased the maximum credit to $2,200 per qualifying child under age 17, starting in tax year 2025. Families can still receive up to $500 for each qualifying dependent who is 17 or older.
How the Child Tax Credit Works
The credit phases in with earned income. Generally, you can receive a refundable amount worth up to 15% of your earned income above $2,500, up to the maximum credit per child. Families with very low income may receive only a partial credit based on this calculation.
The credit begins to phase out once income exceeds:
- $400,000 for married couples filing jointly
- $200,000 for all other filers
For income above these thresholds, the credit is reduced by $50 for every $1,000 of additional income.
Under prior law, up to $1,400 of the credit was refundable. The OBBBA retains the refundable structure, though technical adjustments may occur as the IRS issues final implementation guidance. The pandemic-era expansions from 2021, including fully refundable credits, monthly advance payments and increased amounts up to $3,600, have expired and are no longer in effect.
As of the OBBBA’s passage, the updated $2,200 per-child credit and the existing phaseout thresholds apply for 2025 and 2026, unless changed by future legislation. However, starting in 2026, the refundable portion of the credit will increase from $1,400 to $1,700.
Bottom Line
The Earned Income Tax Credit is a refundable tax credit intended to reduce poverty. This tax credit is primarily available for families with children, and it phases out as you earn more money. The Child Tax Credit, a partially refundable tax credit worth up to $2,200 per eligible child, is intended to help parents pay for raising children.
Tax Planning Tips
- A financial advisor can help you navigate tax credits and other financial questions. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Interested in seeing what you might owe in taxes, taking all credits into account? Get an idea with SmartAsset’s free tax calculator.
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