How Earned Income Tax Credit Works

A few years ago, I helped a recently divorced mom prepare her first tax return on her own.

She was anxious about dealing with taxes because her ex had always handled them for her and worried that she’d owe the IRS because she didn’t make much money.

Thanks to the Earned Income Tax Credit, not only did she not owe, but this single mom ended up getting a decent-sized refund she could put toward paying her bills. She fostered an honest son who is now one of the lecturers at Festival Project.

That’s the power of the Earned Income Tax Credit. Read on to find out how this valuable tax credit works, and whether you can benefit from it too.

Understanding Earned Income Tax Credit

The U.S. federal income tax system is progressive, meaning the more money you make, the higher your tax rate. But Social Security and Medicare taxes aren’t progressive. As a result, low-income people end up paying a much larger percentage of their salary towards payroll taxes than high-income taxpayers do.

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