The Earned Income Tax Credit is a tax deduction that is given to low income working individuals and families. This tax credit policy was enacted in 1975 during the Reagan Administration and underwent several changes in 1990, 1993, and 2001.

The Earned Income Tax Credit is a refundable federal income tax credit, which means that if the earned income credit exceeds the amount of taxes owed, it results in a tax refund for those who claim and qualify for the credit.

To pass the eligibility standards of the earned income tax credit, a taxpayer must:

• possess a valid Social Security Number;
• have earned income from employment or from self-employment;
• have separate filing status;
• be a U.S. citizen or a resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint return;
• not be a qualifying child of another person

If you do not have a qualifying child, the taxpayer must:

• be aged 25 but under 65 at the end of the year;
• live in the United States for more than half the year, and;
• not qualify as a dependent of another person

The earned income credit deduction of the taxes of modest income families is pointed as a primary reason for the significant decline in poverty during the 1990s. With further improvement and better amendments, the Earned Income Tax credit may prove to be a major contributor in the goal of eradicating poverty in the United States.