How the credit is calculated

The EITC is not a flat amount. It rises with your earnings, levels off, and then falls away — a shape the IRS calls phase-in, plateau, and phase-out. Understanding that shape explains almost every surprise in the credit: why earning a little more can raise your credit, why earning a lot more can reduce it, and why two workers with the same wages can receive different credits.

The IRS does not ask you to do this math by hand. The official EIC table, printed in the tax instructions, gives the exact credit for your income level and family size. This guide explains the shape so the table makes sense — and so you can spot an error if your software or preparer gets it wrong.

The three phases

Phase-in. At very low earnings, the credit grows with each dollar you earn. This is the point of the credit: it rewards the first dollars of work most strongly. A worker earning $2,000 receives a much smaller credit than a worker earning $10,000, because the credit has not yet reached its maximum.

Plateau. Once earnings reach a certain level, the credit stops growing and holds at its maximum — $4,328 for one child, $7,152 for two, $8,046 for three or more in 2025. Workers across a middle band of incomes all receive the same maximum, which is why the credit feels flat for many families.

Phase-out. Past the plateau, the credit shrinks by a fixed percentage of each additional dollar of income until it reaches zero at the cutoff in the 2025 table. This is the range where earning more reduces the credit — but note that the credit shrinks by only part of each extra dollar, so you are always better off earning more in total cash terms.

Which income counts: earned income vs AGI

Here is the detail that catches people out. The IRS measures the phase-out against the larger of your earned income and your adjusted gross income. If your wages are low but your AGI is high — for example, because you received unemployment compensation, taxable Social Security, or a pension — the phase-out uses the AGI figure, and your credit may be smaller than your wages alone would suggest. Both figures must be below the cutoff, and the larger one drives the calculation.

Earned income itself means pay for work: wages, salaries, tips, and net earnings from self-employment. It does not include interest, dividends, pensions, unemployment benefits, Social Security, or SSI. One exception worth knowing: disability retirement benefits received before minimum retirement age can count as earned income; ordinary SSDI and SSI payments cannot. The special rules guide covers the exceptions.

Using the EIC table

The EIC table is a lookup grid: find your income range in the left column, then read across to the column for your filing status and number of qualifying children. The table works in $50 income bands, so you find the band your income falls in rather than your exact dollar figure. Tax software and the IRS EITC Assistant do this lookup for you, but checking the table yourself is the fastest way to verify a result that looks wrong.

A practical tip: if your income sits near the top of the phase-out, small changes matter. A $500 year-end bonus can move you into a lower credit band, and a deductible retirement contribution can move you the other way by lowering AGI. Neither move is a reason to refuse pay — the credit shrinks by only a fraction of each extra dollar — but both are worth understanding before you file.

Sources to check: IRS Publication 596, Earned Income Credit (2025); IRS, Earned income and Earned Income Tax Credit (EITC) tables (irs.gov).