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The biggest refundable credit in the code — and a fifth of eligible workers never claim it.
The earned income tax credit pays up to $8,231 (three or more children, 2026) as a refund even if you owe zero tax — yet the IRS estimates roughly one in five eligible workers never files for it. The credit phases in with earnings, plateaus at a maximum, then phases out at 15.98% or 21.06% — a hidden marginal tax stacked on your bracket. This calculator runs the statutory formula from Rev. Proc. 2025-32, handles the greater-of-AGI-or-earnings rule, the $12,200 investment-income cliff, and shows exactly where on the curve you sit.
Low- and moderate-income workers use it to claim the refundable credit a fifth of eligible filers leave unclaimed — and to see the hidden 16–21% phase-out rate stacked on their bracket, plus the $12,200 investment-income cliff that zeroes the credit outright.
Maximum credits (Rev. Proc. 2025-32): $664 with no children, $4,427 with one, $7,316 with two, $8,231 with three or more. The credit phases in with earnings (7.65%/34%/40%/45%), plateaus, then phases out — gone at $19,540 (childless single) up to $70,244 (joint, 3+ children). It is fully refundable: you receive it as a refund even with zero tax liability.
In the phase-out range the credit shrinks 15.98¢ (one child) or 21.06¢ (two or more) per additional dollar of income — on top of your regular bracket and payroll tax. A parent with two kids in the 12% bracket pays an effective 12% + 7.65% FICA + 21.06% ≈ 40.7% on the next dollar earned. It is not a reason to earn less — the credit still beats not having it — but it is real money when timing a bonus or extra shift, and pre-tax 401(k) contributions reduce AGI and slow the phase-out.
The sharp edges: investment income over $12,200 (2026) zeroes the credit completely — a cliff, at any earnings level. No qualifying children means you must be 25–64 and not claimable as a dependent. Married filing separately is generally ineligible (narrow separated-spouse exception). Everyone claimed needs a valid SSN. And refunds with EITC are held by law until late February at the earliest (PATH Act) — plan cash flow accordingly.