What is the difference between EITC and CalEITC? Can you claim both?
The IRS and California FTB offer certain filers with earned income a tax credit that can be worth a substantial amount of money. But requirements differ…
Millions of Californians benefit from a tax provision available both from the state and the federal government that is targeted to workers with more modest incomes. The refundable tax credit is called the Earned Income Tax Credit, EITC for the IRS and CalEITC for the California Franchise Tax Board (FTB).
Although each credit must be claimed separately, the EITC on federal tax returns and the CalEITC on California tax returns, tax filers can claim both. Combined they could be worth over $10,000 this tax season. But the eligibility requirements differ between the two. Here’s a look at who is eligible and how much could be claimed…
Who Is Eligible to claim EITC and CalEITC worth over $10,000?
The EITC is targeted toward low-and middle-income workers while the CalEITC is focused solely on low-income earners. Eligible EITC recipients can receive up to $6,935 and eligible CalEITC recipients can claim up to $3,417. When added together that makes a total of $10,352 that can go toward reducing your tax burden or be added onto your tax refund.
However, the exact amount will depend on the situation of each family or individual applying, such as the number of children one has as well as annual income. There is also a limit on any income from investments for the federal EITC.
Below are the requirements for each:
EITC
- Having worked and earned lower income to $59,187
- Have had investment income of less than $10,300 in tax year 2022
- Have a valid Social Security number
- Be a US citizen or resident alien for the entire year
- Failing to File Form 2555 (Foreign Earned Income)
CAEITC
- Be 18 or older or have a qualifying child
- Have earned income of at least $1.00 and not more than $30,000
- Have a valid Social Security Number or Individual Taxpayer Identification Number (ITIN) for yourself, your spouse, and any qualifying children
- Living in California for more than half of the tax year
- Not be eligible to be claimed as a qualifying child or dependent of another taxpayer
How to claim the EITC and CalEITC?
The federal EITC requires filing of your federal return (Form 1040EZ, 1040 or 1040A) and Schedule Earned Income Credit. Be sure to thoroughly check all of the information that you provide when claiming the credit, even if someone else prepares your tax return, to avoid having some or all of the credit denied.
California EITC requires filing of your state return (Form 540 2EZ or 540) along with a Form 3514 and having earned income reported on a W-2 form (i.e. wages, salaries, and tips) subject to California withholding.
If you are eligible to collect both credits, you will need to claim them through your respective federal and California tax returns.
How much can you claim for the EITC and CalEITC?
The exact amount that you can claim for the federal and California state EITCs depends on the total number of qualifying children, as well as your annual income. For the CalEITC, recipients must earn at least $1.00 and not more that $30,000.
The federal EITC earned income limits are as follows:
| Children or Relatives Claimed | Filing as Single, Head of Household, or Widowed | Filing as Married Filing Jointly |
|---|---|---|
| Zero | $16,480 | $22,610 |
| One | $43,492 | $49,622 |
| Two | $49,399 | $55,529 |
| Three or more | $53,057 | $59,187 |
Keep in mind that you may also be able to claim the federal Child Tax Credit (CTC), as well as the California Foster Youth Tax Credit (FCTC) and Young Child Tax Credit (YCTC).
Here’s a look at the maximum amounts available:
| No. of qualifying children | Max. CalEITC | Max. YCTC | Max. FYTC | Max. federal EITC |
|---|---|---|---|---|
| Zero | $275 | $0 | $1,083 | $560 |
| One | $1,843 | $1,083 | $1,083 | $3,733 |
| Two | $3,037 | $1,083 | $1,083 | $6,164 |
| Three | $3,417 | $1,083 | $1,083 | $6,935 |
The California Franchise Tax Board provides a calculator to estimate how much you may get from the four credits CalEITC, FCTC, YCTC and EITC.
When can I expect my tax refund?
Payment for each credit will come to you as a refund, minus any taxes owed and debts with the IRS or another federal or state agency, once the IRS and the California Franchise Tax Board have processed your tax return.
The federal tax agency has up to 21 days after processing your return to start issuing payments, as long as you have a linked account for direct deposit, otherwise, the the timeline can be extended from six to twelve more weeks.
The FTB generally takes up to two weeks to issue your tax refund if you e-filed and up to four weeks for paper return.
When is the tax deadline for 2023?
The 2023 tax season is under way and filers have until Tuesday 18 April to turn in their federal tax declarations for the 2022 fiscal year. The same deadline applies to residents of California to file their state tax returns.
If you are having trouble getting all the paperwork together and need some more time, you can petition for a six-month extension to submit your tax return by 16 October. Note though that you will need to pay any taxes due by the April Tax Day. For those who were affected by the severe weather in California the IRS and California Franchise Tax Board (FTB) have automatically extended the filing deadline to 16 October.