Workers who are paid low wages — and in many cases are trying to raise children on overstretched paychecks — can qualify for a financial boost by claiming the earned income tax credit on their tax returns.
But oddly enough, many people don’t know a thing about a credit that often can help them bring home a bigger tax refund.
Maybe, they’re working in a low wage job and just had a baby in 2024. Someone with one qualifying child and a lower income could qualify for up to $4,213 for the federal earned income credit.
Or maybe, they lost a good paying job and now are struggling to get by working a few jobs here and there. Someone who does not have children, for example, can qualify for up $632 for the federal earned income tax credit on their 2024 federal income tax returns, if their income is low enough.
Life happens — and change means that you could qualify for a tax credit one year when you couldn’t in the past.
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Every year, almost a third of those who qualify for EITC for the first time in their lifetime can claim the credit because of changes in their marital, parental, or financial status, according to the Internal Revenue Service.
The money received after claiming the earned income tax credit, though, is life-changing, according to advocates.
Last tax season, for example, a single mother with three daughters in metro Detroit “was really on the precipice, really on the edge of difficulty,” according to Priscilla Perkins, president and CEO of the Accounting Aid Society, which prepares taxes for free for individuals who qualify.
The mother ended up getting $3,500 in a tax refund last year, thanks to the earned income tax credit and the child tax credit, Perkins said.
“That is absolutely life-changing for a mother right on the edge of things,” Perkins said.
Not everyone who qualifies, though, knows about the credits or free tax help that’s available.
Many who overlook the earned income tax credit end up leaving good money on the table by not filing a tax return to claim the credit.
The IRS estimates that one in five eligible taxpayers misses out on claiming the earned income tax credit.
Many low-income workers aren’t required to file a tax return because their incomes are so low that they’re not obligated to file a return. So, they don’t bother. But the tax return hassle is worth it for families and individuals who qualify for the earned income tax credit.
You’d even get a refund if you didn’t have taxes withheld from your paycheck, and don’t owe taxes, if you qualify for the credit.
“Confusion regarding eligibility is a big reason that people don’t claim it, causing them to be cautious to avoid creating an adverse situation with the IRS,” said Matt Hetherwick, chief program officer for the Accounting Aid Society.
“Eligible filers move in and out of the eligibility window every year,” he said.
People can misunderstand the rules, such as those involving eligibility of dependents, filing status and earnings. As a result, it’s best to work with a trusted tax professional or work with tax software, if you’re comfortable doing your own taxes.
Currently, the state of Michigan offers extra money through a state earned income tax credit, which is a direct 30% match of an individual taxpayer’s federal EITC amount. For 2024, the maximum state earned income tax credit for Michigan is $2,349.
How do you get free tax help?
Free tax help is available for filing the credit through three area groups: United Way for Southeastern Michigan, Accounting Aid Society, and Wayne Metropolitan Community Action Agency.
In 2025, people who generally make $67,000 or less qualify for these services through the IRS’s Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs.
In southeastern Michigan, tax filers can find a one-stop spot to connecting with free tax help services by calling 211 or going online to GetTheTaxFacts.org to get more information and make an appointment for free tax help at a variety of locations.
The United Way of Southeastern Michigan supports Volunteer Income Tax Assistance offered through the Accounting Aid Society and Wayne Metro.
Megan Thibos, director of community impact innovation for United Way for Southeastern Michigan, said the free tax preparation coalition served 24,000 metro Detroiters who claimed more than $26 million in tax refunds last year.
Charlene Coates, 60, who lives on Detroit’s east side, said she learned of the free tax help through Wayne Metro about four years ago through the Rossiter Block Club.
Coates, who was a medical assistant in pediatrics but is now disabled, said her taxes are already done this year and she’s waiting for an expected $1,500 refund.
Karalyn Hill-Fuqua, of Romulus, had her taxes completed Wednesday in an hour or so at the Wayne Metro’s service hub at 7310 Woodward Ave., near East Grand Boulevard.
Hill-Fuqua, 62, said she would have had to pay hundreds of dollars to get her taxes done somewhere else. She worked for years as a social worker but has had three strokes, and Wednesday she was anticipating surgery in a few days.
“Things have changed, so here I am,” said Hill-Fuqua, who has been getting her taxes done for free for the past three years. She doesn’t qualify for the earned income tax credit. But she is still anticipating a $2,400 federal income tax refund and a $1,500 state income tax refund via direct deposit.
“That’s money I can use to pay some bills,” she said.
What’s the earned income tax credit?
The federal earned income tax credit, which has been around for 50 years, is designed to give low-income wage earners a financial lift through the tax system. Advocates say the credit recognizes that extra costs associated with holding down a job can discourage low-income wage earners from working.
“The Tax Reduction Act of 1975 introduced EITC as a modest tax break to provide financial help to economically challenged families and encourage work,” according to the IRS web page celebrating the 50th anniversary of the credit.
The earned income credit is refundable — which means that even people who did not earn enough money to have taxes withheld can receive hundreds or thousands of dollars in a tax refund for the earned income credit.
As of December 2024, about 23 million workers and families received about $64 billion from the federal earned income tax credit, according to IRS data.
In Michigan, about 676,000 workers and families received $1.9 billion by claiming the earned income tax credit on their 2023 federal income tax returns.
Claiming the credit can reduce the tax owed or may lead to a much larger refund.
Under the Protecting Americans from Tax Hikes Act, the IRS is not allowed to issue a refund involving the earned income tax credit before mid-February.
This year, the IRS told early filers that refunds from tax returns that claim the earned income tax credit and the additional child tax credit are expected to be available in taxpayer bank accounts or on debit cards by March 3. That’s if tax filers e-file the return, opt for direct deposit and there are no other issues with the tax return.
What is the maximum amount for the EITC?
Nationwide, the average amount of federal earned income tax credit received was $2,743 for the 2023 tax year. The average amount was $2,813 for workers and families in Michigan.
Some larger families with lower incomes can receive much more than the average figures.
The federal earned income tax credit hits a maximum of $7,830 for a lower wage worker with three or more qualifying children in 2024.
The dollar amount that households receive will vary significantly and depend on your pay, filing status, and the size of your family. You need to have worked in 2024. The IRS has four tests for what is defined as a “qualifying child” — based on age, relationship, residency, and filing status. The rules can get complicated.
How do you claim the credit?
To claim the credit, you first must file a 1040 federal income tax return. If you are claiming the credit for a qualifying child, you must also file the Schedule EIC, Earned Income Credit with your return.
More:Tax season 2025: Kickoff expected to start soon. Common problems can delay refunds
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When it comes to the earned income credit, it’s helpful to know:
- The child or children you claim for the credit must be related to you, but grandparents who are raising children can qualify.
- The child or children must live in the same home as you do for more than half of the tax year.
For the tax year 2024, the some portion of the earned income tax credit is available for filers with three or more qualifying children with an adjusted gross income up to $59,899 if single and $66,891 if married filing jointly.
The cutoff for those without children is up to $18,591 if single and $25,511 if married filing jointly.
File a Michigan income tax return to claim a state credit
Michigan’s 2024 tax return, forms and instructions reflect an expansion of Michigan earned income tax credit for Working Families.
More:Michigan 2025 tax season: Where’s my refund? How to track your return online
Once you qualify for the federal earned income tax credit and claim it on a federal return, you can take advantage of the Michigan credit. If you do not qualify for the federal EITC, you do not qualify for the Michigan EITC.
For the 2023 tax year, more than 653,000 recipients received the Michigan earned income tax credit with an average credit at $836. More information about Michigan EITC can be found at michigan.gov/taxes/iit/eitc.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
In 2024, many individuals will be eligible to file for tax returns. Those who are eligible include:
1. Individuals who earned income during the tax year and meet the income threshold for filing a tax return.
2. Self-employed individuals who made a profit during the tax year.
3. Married couples filing jointly or separately who meet the income requirements.
4. Parents who have dependents and qualify for tax credits such as the Child Tax Credit or Earned Income Tax Credit.
5. Individuals who made charitable contributions and can deduct them from their taxable income.
6. Homeowners who paid mortgage interest or property taxes and can deduct them from their taxable income.
7. Individuals who have investments and earned dividends or capital gains.
It’s important to note that eligibility for tax returns can vary based on individual circumstances, so it’s recommended to consult with a tax professional or use tax software to determine your eligibility and maximize your tax refund.
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