Why Is My Earned Income Credit Low as a Single Person With One Child?
Understand the factors that affect your Earned Income Credit as a single parent, including income limits, phaseout rates, and eligibility requirements.
The Earned Income Tax Credit (EITC) provides financial relief for low- to moderate-income workers, but many filers are surprised when their credit is lower than expected. For a single person with one child, several factors influence the final calculation, including income levels, filing status, and phaseout rules.
Understanding why your EITC is lower requires examining how the IRS determines eligibility and adjusts the credit based on earnings and other criteria.
Eligibility Requirements
The IRS considers income, filing status, and dependents when determining EITC eligibility. Each factor affects the credit calculation and whether it is reduced or remains at its maximum amount.
Income Threshold
The EITC benefits workers with earned income, including wages, salaries, and self-employment earnings. For the 2023 tax year, a single filer with one child qualifies for the full credit with earnings up to $11,750. Once income exceeds this amount, the credit begins to decrease. If adjusted gross income (AGI) surpasses $46,560, the filer is no longer eligible.
Investment income also impacts eligibility. Earning more than $11,000 from interest, dividends, or capital gains disqualifies a filer from receiving the credit. Even a small increase in earnings or unearned income can significantly reduce or eliminate the EITC.
Filing Status
Filing status affects how the credit is calculated. Single filers face lower income phaseout limits than married couples, meaning their credit decreases more quickly as earnings rise. Married individuals filing separately are ineligible for the EITC.
Head of Household status allows for a higher income threshold before the credit begins to phase out. To qualify, you must pay more than half the cost of maintaining a home for yourself and your dependent child. Choosing the correct filing status can impact your tax refund and EITC amount.
Dependent Criteria
To claim the EITC with one child, the dependent must meet age, relationship, and residency requirements. The child must be under 19 at the end of the tax year or under 24 if a full-time student. There is no age limit if the child has a permanent disability.
The child must be your biological, step, or adopted child, or a qualifying relative such as a grandchild, niece, or nephew. They must have lived with you for more than half the year in the U.S. If another taxpayer, such as the child’s other parent, also claims them, the IRS applies tie-breaker rules to determine who qualifies for the credit.
Phaseout Rates
The EITC provides the highest benefit to lower earners, but as income increases, the credit gradually decreases before phasing out entirely.
For 2024, the phaseout rate for a single filer with one child is 15.98%. This means that for every dollar earned above the phaseout threshold, the credit is reduced by approximately 16 cents. The credit continues to decrease until it reaches zero at the upper income limit.
For example, if a taxpayer qualifies for the maximum credit but earns slightly above the phaseout threshold, their EITC will decline gradually rather than being eliminated all at once. This structure prevents a sudden loss of benefits for those earning just above the qualifying range.
Adjustment Factors
Several factors beyond income and filing status influence the final EITC amount.
Self-employment taxes play a role. Unlike employees who have payroll taxes withheld, self-employed individuals must pay both the employer and employee portions of Social Security and Medicare taxes, totaling 15.3%. While half of this amount is deductible when calculating AGI, the additional tax burden can lower overall earnings, potentially increasing EITC eligibility. However, misreporting self-employment income—whether by underreporting to qualify for a higher credit or overreporting to meet minimum income requirements—can trigger IRS audits and penalties.
Certain types of tax-exempt income also impact the EITC. While Supplemental Security Income (SSI) and child support payments do not count as earned income, they can affect financial stability and eligibility for other tax credits. Receiving advance payments of the Premium Tax Credit for health insurance subsidies can also influence tax liability, potentially reducing the net benefit of the EITC.
State-level Earned Income Credits add another layer of complexity. Many states offer their own versions of the credit, typically calculated as a percentage of the federal EITC. For example, New York provides an additional credit worth 30% of the federal amount. However, eligibility rules and phaseout thresholds vary, meaning a taxpayer who qualifies for the federal credit may not automatically receive a state-level benefit. Some states impose residency requirements or exclude certain income sources, further affecting the total credit calculation.