Earned Income Tax Credit for the State of California

The State of California now has its own version of the Earned Income Tax Credit (EITC).  The tax credit is refundable.  It can either help pay the tax that you owe or give you a refund from the leftover credit.  This tax credit starts with the 2015 tax year.

This credit is available to California households with adjusted gross incomes of less than $6,580 if there are no qualifying children, less than $9,880 if there is one qualifying child, or less than $13,870 if there are two or more qualifying children.  Your investment income, such as interest, dividends, royalties, and capital gains cannot exceed $3,400 for the entire tax year.  If you do not have a qualifying child, you (or your spouse if you file a joint return) must be between 25 and 65 years old at the end of the tax year.

You qualify for Cal EITC if:
•You have wages and adjusted gross income within certain limits, AND
•You, your spouse, and any qualifying children each have a social security number issued by the Social Security Administration that is valid for employment, AND
•You do not use the “married/RDP filing separately” filing status, AND
•You lived in California for more than half the tax year.

Your qualifying child must meet 3 criteria:

• Relationship - Is the taxpayer’s child, stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of any of them.
• Residence - Had the same principal residence as the taxpayer in California for more than half the tax year. Certain exceptions apply.
• Age - Child must be younger than the taxpayer and either a) under the age of 19 at the end of the tax year, or b) under the age of 24 if a full-time student for at least 5 months of the year. A permanently and totally disabled child may be included at any age

Personally, I do not think that many taxpayers are going to be able to take advantage of this tax credit.  I think that the income limits for California are too low.  I think that the California taxpayers should convince the legislature to raise the income limits to closer to what the Federal EITC limits are.