Twenty-five states and the District of Columbia offer resident taxpayers a state version of the federal earned income tax credit (EITC). Indiana is amongst the states who seek to reduce poverty through a tax credit that puts money back into their taxpayers' pocket.
Indiana's EITC eligibility follows older federal guidelines, that don't account for recent expansions or improvements to the current federal credit. Indiana taxpayers who were able to claim the federal Earned income tax credit are likely eligible to claim the state version as well. However, Indiana has separated itself from the federal guidelines by expanding the state EITC to include families with three or more children, as well as increasing the income phase out level for married couples.
The EITC in Indiana is offered at 9% of the federal credit, and is fully refundable. Refundability is the key to success with the EITC, as it allows Hoosiers to keep more of what they earn, therefore elevating them above the poverty level. Any part of the EITC that is greater than the amount a family owes in income tax is returned to the taxpayer, and can be used to offset other significant state and local taxes. Families with zero income tax liability will receive the entire EITC as a refund.
This tax season, don't forget to check your eligibility for the EITC (both federal and state), and regain some more of your hard earned cash.