California Refundable Earned Income Tax Credit (EITC)

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July 8, 2015 (Revised August 12, 2015)

Purpose of bulletin

To inform staff that the recently passed budget enacts the first ever state EITC to help California’s poorest working families. This targeted EITC provides a refundable tax credit for earned income, and will focus on the lowest income Californians. This includes households with adjusted gross income (or, if greater, earned income) of less than $6,580 if there are no qualifying dependents or less than $13,870 if there are two or more qualifying children.

Background

California has not offered an EITC before now.

However, the Internal Revenue Service has had this refundable EITC credit for some time. The credit is a percentage of the taxpayer’s earned income and is phased out as income increases. It is a refundable credit, which means that the credit will be refunded to the taxpayer to the extent it exceeds the taxpayer’s tax liability.

Taxpayers with adjusted gross income (or, if greater, earned income) of less than $53,267 may qualify for a federal credit up to $6,242.

CA New Law: Tax Year 2015

The credit will be available beginning with tax returns filed for earned income earned in 2015.

Taxpayers with adjusted gross income (or, if greater, earned income) of less than $13,870 may qualify for a credit up to $2,653, depending on the number of qualifying children.

For purposes of the state EITC, the definition of “earned income” includes W-2 wages, salaries, tips, and other employee compensation, but only if such amounts are subject to California withholding. Additionally, earned income would specifically exclude income from self-employment.

Taxpayer Inquiries

Taxpayers can go to ftb.ca.gov and search for EITC or call us at 800.852.5711, Monday through Friday, 7 a.m. to 5 p.m. 

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