What Is the Missouri Working Families Tax Credit?
Discover how the Missouri Working Families Tax Credit can lower your state tax liability. This nonrefundable credit is based on your federal EITC amount.
The Missouri Working Family Tax Credit is a state-level tax benefit designed to lower the state income tax burden for low-to-moderate-income working individuals and their families. This credit is directly linked to the federal Earned Income Tax Credit (EITC).
Eligibility Requirements
To qualify for the Missouri Working Family Tax Credit, a taxpayer must first meet all the requirements for the federal Earned Income Tax Credit. A requirement is having earned income, which includes wages, salaries, tips, and net earnings from self-employment. Passive income sources like interest, dividends, Social Security benefits, and unemployment compensation do not count as earned income for this purpose.
Federal EITC income thresholds change annually and vary based on filing status and the number of qualifying children. While the federal investment income limit is $11,600 for the 2024 tax year, Missouri imposes a more restrictive limit of $4,300 for the state credit. Additionally, the taxpayer, their spouse, and any qualifying children must have a Social Security number that is valid for employment.
A taxpayer’s filing status cannot be married filing separately; eligible statuses include single, head of household, qualifying widow(er), and married filing jointly. Missouri also imposes its own residency rule, as a taxpayer must be a Missouri resident for the entire tax year to claim the credit.
Credit Calculation and Limitations
The Missouri Working Family Tax Credit is calculated as a percentage of the federal EITC. For the 2024 tax year, the state credit is 20% of the federal EITC amount claimed by the taxpayer. For example, if a qualifying family receives a federal EITC of $3,000, their Missouri credit would be $600.
The Missouri credit is nonrefundable, which means it can reduce a taxpayer’s state income tax liability to zero, but any excess credit amount is not paid out as a cash refund. The credit is applied against the tax owed after other credits, such as the Property Tax Credit, have been calculated.
For example, a taxpayer who owes $400 in Missouri income tax and calculates a Working Family Tax Credit of $500 will have their tax liability eliminated. The remaining $100 of the credit is forfeited and cannot be received as a refund or carried forward to apply against a future year’s tax liability.
Claiming the Missouri Working Family Credit
To claim the credit, a taxpayer must complete Missouri Form MO-WFTC, the Working Family Tax Credit form, and attach it to their Missouri Individual Income Tax Return, Form MO-1040. Failure to attach Form MO-WFTC and a complete copy of the federal return can result in the credit being disallowed.
When using tax preparation software, the process is largely automated. After a taxpayer enters all federal information, the software identifies eligibility for the Missouri credit, performs the calculation, populates Form MO-WFTC, and transfers the final credit amount to Form MO-1040.
Taxpayers who file on paper must complete these steps manually. They will need to obtain Form MO-WFTC, calculate the credit, and fill out the form before entering the amount on Form MO-1040. The completed paper return, with the attached Form MO-WFTC and a copy of the federal Form 1040, must be mailed to the Missouri Department of Revenue.