The Earned Income Tax Credit was first created in 1975. It is an important part of the United States government’s income tax credit policy and has undergone many revisions and strengthening measures since its original passage. In terms of the overall field of income tax credits, this provision is considered to be “means tested,” which refers to the fact that it will be provided to taxpayers pending the finding that their means entitle them to receive it.
This finding usually consists of an evaluation of a person or family’s financial situation. In this sense, the Earned Income Tax Credit has been a major part of the United States government’s anti-poverty policy and has been periodically resurrected by American politicians in order to demonstrate their commitment to working-class constituents.
In a prominent example of this kind of politicized treatment of income tax credits, the provision for Earned Income Tax Credits was extended in 1987 under the Reagan Administration, with later prominent reforms to the program coming in 1990, 1993 and 2001. Earned income tax credits can also be instituted on a state or municipal level. In the case of the former, by 2006 twenty states were found to have an earned income tax credit policy on the books.
These qualifications addressed by the Earned Income Tax Credit include various aspects of an United States citizen or resident alien’s financial straits, family situation, living arrangements, and “age” (as pertains more to reasonable expectations as to an individual’s ability to provide for his or her well-being than to the actual period for which a person has been alive). As to the last point, the finding that a citizen or resident is disabled in some way can be applied to income tax credits.
If the family situation is being claimed as a qualification for an Earned Income Tax Credit, then the applicable offspring of the taxpayer must be either genetically or legally related to her or him, and the residence of the child and parent must have been living together for at least one day and six months, excluding non-permanent interruptions and absences due to military service. Taxpayers who do not have offspring either by biology or adoption must be no more than sixty-five years old and no less than twenty-five years old.
The kinds of income which are considered to fall under the purview of the Earned Income Tax Credit are specified for the purpose of the IRS by American tax code, which defines “earned income.” The kind of earnings which can be considered “earned income” are thus specified to include the pay acquired by workers, such as from salaries, gratuities, and other common sources, the net income of a person working for herself, money given to a person on disability, the gross amount of pay received by an employee under a statute, and the salary of a member of the United States military, which may be either included in its entirety or excluded entirely from consideration as an Earned Income Tax Credit.