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State Earned Income Tax Credit

Priority Policy Overview

The EITC is one of the largest and most effective wage support programs for low- and moderate-income families. It supplements the earnings of workers by reducing their tax burden. When the EITC is greater than the amount of taxes owned, the taxpayer receives a refund. Every year millions of Americans use these refunds to get out of debt and start saving for the future. States should enact their own EITCs that build on the federal credit.

For more information, see either the State Earned Income Tax Credit Policy Brief or State Earned Income Tax Credit Resource Guide.

Elements of a Strong Policy

CFED considers a state’s EITC policy strong if it meets the following criteria:

1. Has the state enacted an EITC policy? A first step that states should take to is to get a state EITC—no matter how small—on the books. Even a relatively small credit will benefit low-income families and can lay the groundwork for subsequent expansion.
2. Is the credit refundable? Refundability is the single most important component of the EITC. Because families with low earnings are likely to have little or no state income tax liability, only a refundable credit reaches them, giving them an added incentive to work and helping to offset the other state taxes they pay.
3. Is the credit at least 15% of federal EITC? Credit levels should be large enough to ensure that working poor families receive adequate support to benefit from the program. Primary considerations in setting a state credit level include the affordability of the program for the state, the level of tax relief desired and the size of the desired income boost for poor families.
4. Is there a bonus if EITC funds are deposited into a savings or investment account? The majority of EITC refunds are used to meet immediate needs. However, refund checks are often the largest lump-sum, discretionary funds that low-income taxpayers receive all year. Their potential to further long-term asset development is significant. Providing an incentive that encourages savings, either through IDAs or other savings instruments, can improve the asset development prospects of many working families.¹

Policy Ratings

For information on the Scorecard's policy rating methodology, click here.

Status of State Earned Income Tax Credits¹

State	Has State EITC?	Refundable Credit?	At Least 15% Of The Federal Credit?	Savings Bonus?2	Rating
Alabama	No
Alaska	No
Arizona	No
Arkansas	No
California	No
Colorado	Suspended3
Connecticut	No
Delaware	Yes	No	20%	No
District of Columbia	Yes	Yes	40%	No
Florida	No
Georgia	No
Hawaii	No
Idaho	No
Illinois	Yes	Yes	5%	No
Indiana	Yes	Yes	9%	No
Iowa	Yes	Yes	7%	No
Kansas	Yes	Yes	17%	No
Kentucky	No
Louisiana	Yes	Yes	3.5	No
Maine	Yes	Yes4	5%	No
Maryland	Yes	Yes5	25%	No
Massachusetts	Yes	Yes	15%	No
Michigan	Yes	Yes	20%	No
Minnesota	Yes	Yes	Average 33%6	No
Mississippi	No
Missouri	No
Montana	No
Nebraska	Yes	Yes	10%	No
Nevada	No
New Hampshire	No
New Jersey	Yes	Yes	25%	No
New Mexico	Yes	Yes	10%	No
New York	Yes	Yes	30%	No
North Carolina	Yes	Yes	5%	No
North Dakota	No
Ohio	No
Oklahoma	Yes	Yes	5%	No
Oregon	Yes	Yes	6%	No
Pennsylvania	No
Rhode Island	Yes	Yes7	25%	No
South Carolina	No
South Dakota	No
Tennessee	No
Texas	No
Utah	No
Vermont	Yes	Yes	32%	No
Virginia	Yes	No	20%	No
Washington	Yes8	Yes	5%9	No
West Virginia	No
Wisconsin	Yes	Yes	Average 16%10	No
Wyoming	No