Understanding Tax Credits

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a tax credit for people who have earned a low to moderate income. EITC is the #1 antipoverty program in the U.S. As of December 2020, approximately 25 million eligible workers and families nationwide received roughly $62 billion back from the EITC.

Eligible tax filers can receive up to $6,935 depending on income and family size.

To qualify, you must:

• File a federal income tax return
• Have earned income between $1 – $59,187
• File with a Social Security Number (SSN) valid for employment
• Be a U.S. citizen or resident alien all year
• If you are single without any dependents, you must be at least 25 years old, but under 65 as of December 31
• You cannot be:
  • Married and filing separately unless you meet an exception:
    • Lived apart from their spouse for the last 6 months of the year OR
    • Are legally separated according to state law under a legal separation agreement OR
    • Have a decree of separate maintenance and didn’t live in the same household as their spouse at the end of the year.
  • A qualifying dependent of another person.

What else you should know:

• Claiming tax credits is not considered income and will not affect any of the other public benefits you might receive. Tax credits, like the CalEITC and EITC, are not considered public benefits under the U.S. Citizenship and Immigration Services public charge rule.
• The federal EITC is only available for those filing with a Social Security Number (SSN). However, now singles and couples who have Social Security numbers can claim the credit, even if their children don’t have SSNs. In this instance, they would get the smaller credit available to childless workers. In the past, these filers didn’t qualify for the credit. Read on for other tax credits that are now eligible for ITIN filers.

California Earned Income Tax Credit (CalEITC) 

Like the federal Earned Income Tax Credit, the California Earned Income Tax Credit (CalEITC) is a tax credit, but available exclusively to Californians — including Individual Tax Identification Number (ITIN) holders. An estimated 3 million California families and individuals qualified for the credit in 2021.

Eligible tax filers can receive up to $3,417 depending on their income and family size.

To qualify, you must:

• File a California state tax return
• Have taxable earned income between $1 – $30,000
• File with a valid Social Security Number (SSN) or Individual Tax Identification Number (ITIN) 
• Be at least 18 years old OR have a qualifying child 
• Have lived in CA for more than half the filing year
• You cannot be: 
  • Be claimed as a qualifying child of another taxpayer
  • Be claimed as a dependent of another person unless you have a qualifying child
• Married/registered domestic partner (RDP) filing separately filers must meet all of the following requirements:
  • Had a qualifying child who lived with you for more than half of the tax year, and:
    • You lived apart from your spouse/RDP for the last 6 months of the tax year, or
    • You are legally separated by state law under a written separation agreement or a decree of separate maintenance and you did not live in the same household as your spouse/RDP at the end of the tax year

What else you should know:

• You may go back up to four years to claim CalEITC by filing or amending a state income tax return.
• You do not have to have a child to qualify for CalEITC, unless you are under 18 years old.

Child Tax Credit (CTC)

The Child Tax Credit (CTC) is a tax benefit granted for parents of qualifying children. Many changes to the child tax credit (CTC) for 2021 implemented by the American Rescue Plan Act of 2021, have expired. For the 2022 tax year, the Child Tax Credit is up to $2,000 per qualifying child. The exact amount a family receives is based on income and the number of qualifying children you claim on your tax return.

To qualify, you must:

• Have a qualifying child who was under 17 at the end of 2022 with a Social Security Number valid for employment, and who provided no more than half of their own financial support and lived with the tax filer claiming the credit for more than half the tax year
• Have taxable income of $400,000 or less if you are married and filing a joint return OR
• Have taxable income of $200,000 or less for all other filing statuses

What else you should know:

• Only one person can claim a child. We encourage people to have conversations with family members before it’s time to file. 
• Even if you weren’t required to file taxes in 2020 or 2019, you can still receive your Child Tax Credit benefits.
• Parents who are ITIN holders can claim the federal Child Tax Credit (CTC) until 2025, if they have a qualifying child with a valid SSN.

Young Child Tax Credit (YCTC)

The Young Child Tax Credit is a benefit available exclusively to California families with young children who also qualify for the California Earned Income Tax Credit (CalEITC). 

Eligible households can receive up to $1,083. 

To qualify, you must:

• File a California state return and qualify for the CalEITC
• Have taxable income between $1 – $30,000
• Have at least one child under the age of 6

What else you should know:

• For tax year 2022 forward, you may qualify for YCTC with total earned income of zero dollars or less provided all the following apply:
  • Your total wages, salaries, tips, and other employee compensation (whether subject to California withholding or not), if any, do not exceed $32,490
  • Your total net loss does not exceed $32,490, and
  • You otherwise meet the CalEITC and YCTC requirements
• Only one person can claim a child. We encourage people to have conversations with family members before it’s time to file.
• ITIN holders are eligible to receive this credit.

Other Credits

Depending upon your situation and filing status, you may be eligible to receive other credits by filing your taxes. See some commonly-received credits that could help your family below.

Foster Youth Tax Credit

If you are a current or former foster youth and were ages 18 to 25 at the end of the 2022 tax year, you may be eligible to receive the new Foster Youth Tax Credit (FYTC), a CA refundable tax credit for tax year 2022 moving forward. The FYTC provides up to $1,083 per eligible individual. 

Nonrefundable Renter’s Credit

If you paid rent for at least half of the tax year and have a personal income tax liability, you may be eligible for a Nonrefundable Renter’s Credit in California. 

Credits for Child and/or Dependent Care 

You could get thousands in tax credits and qualify for money to help cover the costs of care for a qualifying child or dependent— which could mean money in your pocket — even if you don’t owe any taxes. Learn more about the Child and Dependent Care Credit at the CA state and federal level.

For California tax filers:

• If you adopted a child in California, you may be eligible to claim the Child Adoption Costs Credit.
• If you cared for an elderly parent, learn more about the Dependent parent credit
  
• If you share joint custody of a child, stepchild, or grandchild, and pay for more than half their expenses, you may be eligible for the Joint custody head of household credit.

Credit for the Elderly or the Disabled

If you are 65 or older or retired on permanent and total disability, you nay be eligible to receive the Credit for the Elderly or the Disabled. For CA tax filers, if you are 65 or older and qualified for head of household previously, you may also be eligible for the Senior head of household credit. 

Students

Take advantage of tax credits that could help you pay tuition bills and stay focused on what matters: your schoolwork. Find out if you’re eligible for college education tax deductions and credits, such as the American Opportunity Tax Credit and the Lifetime Learning Credit, or a student loan interest deduction. If you contribute to the California Access Tax Credit (CATC) Fund, you may also be eligible for the CA College Access Tax Credit.

Individuals Saving for Retirement

Did you know that you could reduce the federal income tax you pay by proactively saving your money for retirement? You may be eligible for the Retirement Savings Contribution credit (Saver’s Credit) for making eligible contributions to your IRA or employer-sponsored retirement plan, or for contributions to your ABLE account, if you’re the designated beneficiary. Learn more about the Retirement Savings Contribution Credit.

Teachers

Have you spent your own money on books or school supplies for your students? If so, you can deduct those expenses and save money. Find out more about Tax Deductions for Teachers.

Homeowners

If you are a homeowner or have recently made improvements to your property, you could save hundreds or even thousands of dollars when filing your taxes. Learn more about tax information for homeowners.

Business owners and the Self-Employed

Every penny counts when you’re running your own small business! Keep more of your hard-earned money and learn more about Tax Breaks for Business Owners and Self-Employed.

Victims of natural disasters

Have you been a victim of a hurricane, flood, fire or other natural disaster? Get answers to some common tax questions and learn about potential tax relief available to you. Find out about Tax Deductions for Victims of Disasters.

Members of the Armed Forces

Did you know that you don’t have to include Veterans Administration disability benefits may qualify for certain tax exclusions? Find answers to common questions about special tax benefits and rules for members of the military.