Policy experts estimate that between 17 to 20 million childless adults could see their tax return triple this year from a one-time federal Earned Income Tax Credit, according to CBS News.
This credit, which is aimed at people in the lowest paid jobs who do not have children, is worth up to $1,500 for the tax year that just ended, compared to a maximum of $538 in 2020. Funds from the $1.9 trillion American Rescue Plan pandemic relief spending bill expanded the credit.
When President Joe Biden signed the bill into law, it also raised income limits and expanded the age range for eligible workers in 2021.
“The American Rescue Plan allows anyone 19 and older, who's not a full-time student [and] who has earnings, to claim the expanded EITC. It expanded both age and income eligibility and it made the credit larger,” said Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy Priorities, a left-leaning think tank.
Why was the program expanded?
Since it was enacted in 1975, the EITC is regarded as one of the U.S. government’s largest antipoverty programs. However, workers without children often get a very small credit according to CBS News.
“What this meant was people who worked for very low pay who were getting such a meager EITC, and also young working adults and older working adults, were completely excluded,” from the EITC's benefits, said Cox.
Rising inflation this year may also be cutting into any wage gains benefitting low income workers.
“While these folks without dependent children may not be faced with the cost of childcare, they're definitely paying more for food, for gas, for rent. For these folks, these necessities may be out of reach,” Aidan Davis, senior state policy analyst at the Institute on Taxation and Economic Policy, told CBS MoneyWatch.
Who can get the credit now?
People as young as 18 can claim the credit on their 2021 tax filing. While the minimum age was 25 in previous years, the Internal Revenue Service has lowered the limit so all workers age 19 and older can get it if they meet income requirements and so 18-year-olds who are homeless or have been in foster care can qualify.
An age limit of 64 years has also been removed for 2021. All full-time students over age 24 do not qualify for the EITC.
In previous years, workers making more than $16,000 were not able to claim the Earned Income Tax Credit. For the 2021 tax year, taxpayers without kids who earned up to $21,430 can claim the credit when they file their tax returns.
If people lost their jobs in 2020 due to the COVID-19 pandemic, they can use income from 2019 to qualify for the credit.
How can people claim the credit?
For those filing their taxes through most commercial tax software, there will be questions about their income to establish if they qualify for the EITC.
If someone qualifies for the credit, their income is low enough that they should be able to file their tax return for free through the IRS Free File program or volunteer-run tax prep sites across the country.
People who file a paper return or through Free File Fillable Forms can find the EITC on Form 1040.
About two-thirds of eligible childless taxpayers claim the EITC every year, compared with more than 80 percent of taxpayers with children, said Cox.
According to the IRS, some groups that may not be aware they can receive the credit despite their eligibility include: people living in non-traditional families, such as a grandparent raising a grandchild; people whose earnings declined or whose marital or parental status changed; people with limited English language skills; people who are members of the armed forces; people living in rural areas; Native Americans and people with disabilities or people who provide care for a disabled dependent.
Those who applied for the credit should keep an eye out for their returns in early March.
What about the future?
According to CBS News, worker-supported organizations are pushing to make the change permanent.
A one-year extension is already included in the Build Back Better Act, another large spending bill that has passed the House but not the Senate. Additionally, starting in 2021, the amount of investment income people can receive while still being eligible for the EITC increases to $10,000 compared to $3,650 in 2020. After 2021, the $10,000 limit will be indexed for inflation.
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