Earned Income Tax Credits Explained

The state of California recently aligned its state tax filing deadline with the Internal Revenue Service. That means for residents living in the 51 of 58 counties declared a disaster zone due to recent storms, including San Francisco, they have until Oct. 16 to turn in their returns.

But if you earned $30,000 or less last year, I strongly encourage you to file as soon as you can so that your tax refund can arrive sooner. Prices are higher on almost everything we buy; global inflation has been taking a bite out of everyone’s budget. It’s especially hard for low-wage workers, often forcing them to cut an expense in order to afford something else.

But there are programs called Earned Income Tax Credits (EITCs), which have been around for years to help give struggling families some financial breathing room. If you earned less than $30,000 last year, I hope you’ll take advantage of these tax refunds. Depending on the size of your household, the checks can be sizable – up to $3,417.

In California, CalEITC is considered one of the most effective tools to help lift people out of poverty, putting thousands of dollars into the pockets of folks who need them the most. And for families with young children, the Young Child Tax Credit (YCTC) can add another $1,083 on top of the CalEITC. Increasing the income of low-wage earners not only raises their quality of life, but also stimulates the local economy when EITC tax refunds are spent.

New for the 2022 tax season is a Foster Youth Tax Credit, providing up to $1,083 for 18- to 25-year-olds placed in the foster care system when they were age 13 or up. Many of these young adults face challenges as they enter adulthood; this financial assistance is designed to help them meet expenses.

As chair of the Assembly Budget Committee, I know the value of EITCs and fought over the years to raise the income limit for CalEITC, and pushed for the inclusion of young adults, seniors aged 65+ with no dependents, and self-employed workers. More recently, the legislature allowed Individual Taxpayer Identification Number holders to also claim the state tax credit. For the 2021 tax year, more than 3.6 million Californians were able to claim CalEITC, YCTC or both, putting more than $1 billion back in their wallets.

Unfortunately, not everyone eligible to claim the CaIETC does so, leaving millions of dollars on the table. There is also the federal EITC, which can boost tax refunds even higher. Together, the combined cash back from both programs can be life-changing – sometimes more than $10,000 for households with three or more children.

The key to getting this cash back is to file a tax return. Many miss out on EITCs because they don’t typically earn enough money to have to file one, or they don’t owe taxes. But the paperwork is necessary to receive a check. The money could be used to pay bills or meet everyday expenses. It can also be put into a saving account for emergencies, something that families living paycheck to paycheck struggle to do. The tax credit also has proven additional long-term benefits, with research showing children whose families receive an EITC refund perform better in school and have better health outcomes. Now, that’s a great investment!

Are you or someone you know missing out? Nonprofits operating Volunteer Income Tax Assistance (VITA) programs can connect people with free tax preparation services. Filing as soon as possible means you can get your money back faster. Don’t wait until October.

For more information, please visit CalEITC4me.org to find out if you qualify, the locations for free tax assistance near you, or how to file a return yourself.

Phil Ting represents the 19th Assembly District, which includes the west side of San Francisco along with the communities of Broadmoor, Colma and Daly City as well as part of South San Francisco.