Monday, January 6, 2014

Earned Income Tax Credit Effectively Adds Up To $2.95 Per Hour Tax Free To A Full Time Worker's Hourly Wage

An employed worker who qualifies for the refundable Earned Income Tax Credit, and who works a 40 hour work week for 52 weeks (2080 hours per year) will see, depending on the number of children in the family, an effective after-tax increase to the worker's hourly wage of:
  • 3 children - $2.95 per hour;
  • 2 children - $2.63 per hour;
  • 1 child - $1.59 per hour;
  • 0 children - $0.24 per hour.
From The IRS, "Preview of 2014 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates:"

2014 Tax Year

Earned Income and adjusted gross income (AGI) must each be less than:
  • $46,997 ($52,427 married filing jointly) with three or more qualifying children
  • $43,756 ($49,186 married filing jointly) with two qualifying children
  • $38,511 ($43,941 married filing jointly) with one qualifying child
  • $14,590 ($20,020 married filing jointly) with no qualifying children
Tax Year 2014 maximum credit:
  • $6,143 with three or more qualifying children
  • $5,460 with two qualifying children
  • $3,305 with one qualifying child
  • $496 with no qualifying children

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