IRS Updates Earned Income Tax Credit for 2025: More Families Eligible for Higher Credits

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The Earned Income Tax Credit (EITC) helps reduce poverty for working American families by providing a tax credit for qualified taxpayers. While the EITC has been around for 50 years, it’s still one of the biggest deductions people miss.

“Nearly 20% of those eligible do not claim the credit. Even though in 2023, the average credit was $2,743,” said Chris Burns, chartered financial analyst (CFA), certified public accountant (CPA), certified financial planner (CFP), vice president and assistant director of research with Greenleaf Trust.

The modest tax break can significantly help and the good news is there have been adjustments to the EITC for the 2025 tax year, which means more families could be eligible and possibly receive a bigger tax refund. Here is what you need to know about EITC and if you qualify for next tax season. 

Also here are other tax credits you may qualify for.

What Is the Earned Income Tax Credit

The EITC was created to give low to moderate-income workers a financial boost. The credit can lower the amount of taxes owed or give a bigger refund. The EITC is a tiered system based on income and the number of dependents.

Here are some key points to take away for the 2025 tax year, per the Internal Revenue Service (IRS):

• You can qualify for up to a $8,046 credit, an increase from $7,830 from previous years
• How much of a credit you can receive depends on income and number of dependents
• You can qualify for a lower amount if you don’t have dependents and meet the income threshold
• Earned income can include wages, tips, self-employment income, certain disability benefits, union benefits and more

Eligibility Requirements

There are specific qualifications to meet in order to benefit.

Here are the eligibility requirements per the IRS:

• Must have a valid social security number
• Have an investment income limit of under $11,600
• You must be a U.S. citizen or resident alien all year
• Must be over 25 or under 65 if you’re filing without a child.
• Earned income must be under $66,819 in tax year 2024 or less, depending on marital or parental status.
• Investment income must be under $11,600 in the tax year 2024
• You must not have to file a Form 2555-EZ, Form 2555 or Foreign Earned Income

Earned Income Tax Credit for Families With Children

The more qualifying children you have in your family, the higher the credit you’ll receive, depending on your income bracket. 

• Age: The child must be under 19 and younger than you or your spouse if you file together, or under the age of  24 if the child is a full-time student for at least five months. In addition, you’ll also qualify if he or she is permanently and totally disabled, regardless of age. 
• Relationship: The child doesn’t have to be biological to qualify. Adopted and foster children are also eligible, in addition to a grandchild, niece or nephew or half-sibling.
  Residency: The child must live with you in the United States for at least six months out of the year
• Joint Return: Only one person can claim an eligible child for the credit. However, if both parents file jointly and claim the child, the child is treated as the qualifying child of the parents.

Common Mistakes To Avoid

While the EITC benefits families, it’s also an abused credit, according to the House Republican Policy Committee.

Here are a few common mistakes to avoid, per Burns:

• Claiming the wrong number of children or dependents — follow the IRS rules for claiming dependents
• Forgetting to claim the credit — approximately 20% of eligible taxpayers do not claim the EITC
• Errors in social security numbers — make sure to use the correct SSN for your filing and for your children/dependents.
• Make sure only one person is claiming the qualifying child

How To Maximize Your Earned Income Credit

To make sure you’re getting the most out of the credit. According to Burns, there are three things you can do.

• The most important step is to claim it
• The amount you receive depends on your income, so you shouldn’t try to adjust your earnings just to get a bigger credit
• Also, be sure to claim all eligible dependents to maximize your credit

Standard Deduction Changes for 2025

In addition, there are notable changes for next year’s tax season, such as increased standard deductions per the IRS, which could also be beneficial.

• If you’re a single taxpayer or married but filing separately for the 2025 tax year, the standard deduction rises to $15,000 for 2025, an increase of $400 from 2024
• Married couples who file jointly will also see an increase in the standard deduction: in the 2025 tax year, the standard deduction will jump to $30,000, an increase of $800 from tax year 2024
• If you’re the head of the household, the standard deduction will be $22,500, which is an increase of $600

The IRS estimates that one in five taxpayers don’t claim their EITC, meaning millions aren’t utilizing the credit. Don’t leave money behind. Speak to a tax professional to find out if you can qualify.

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