2015 Earned Income Credit Table – California’s 2017-18 budget deal includes a major advance for working families struggling on low incomes. A “trailer bill” included in the budget package expands eligibility for California’s Earned Income Tax Credit, CalEITC—a refundable state tax credit that helps people who earn little from their jobs pay for basic needs. Specifically, the bill 1) previously disqualified Allows self-employed workers to qualify for the CalEITC and 2) raises the credit’s income eligibility limit so that workers above income levels can qualify for it. These changes could expand the credit to more than 1 million
Low-income working families beginning in tax year 2017. This represents a significant expansion of the CalEITC, with nearly half a million families eligible for it before the expansion and about 360,000 claiming the credit annually since it was established in 2015.
2015 Earned Income Credit Table
This report provides an in-depth look at what the expanded CalEITC means for low-income Californians. It found that a higher income limit would allow more workers living in or near poverty, including single parents working full-time minimum wage, to qualify for the credit. However, these newly qualified workers will be eligible for more modest credits — less than about $230 for those with children and less than about $84 for those without children. So, while the budget deal makes a significant advance for working families by greatly expanding access to the CalEITC, state policymakers can strengthen this critical tax credit by increasing the benefits these newly eligible workers can receive in future years.
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Before the expansion, the CalEITC was the only EITC in the nation that excluded many self-employed workers, such as small-business owners and independent contractors. This exclusion undermines the basic purpose of the EITC: to encourage and reward work. The 2017-18 budget agreement ends this exclusion beginning in tax year 2017. As a result, all self-employed workers who meet all other requirements for the CalEITC will be able to benefit from the credit. This change better aligns California’s EITC
Before the expansion, many workers who were struggling to get by didn’t qualify for the CalEITC because the income threshold to qualify for the credit was too low. The budget deal raises these limits to allow additional low-wage workers to qualify for the credit. For workers with qualifying children, the new income limit will be $22,300 starting in tax year 2017 (Table 1). it is
More than one and a half times the previous income limit for parents with one child and the previous limit for parents with two or more children. The budget deal also more than doubled the worker’s income limit
A higher CalEITC income limit would allow more minimum wage workers to benefit from the credit. Before the expansion, many minimum wage workers earned too much to qualify for the credit even though they earned too little to make ends meet due to California’s high cost of living. For example, in tax year 2016, families with one child were not eligible for the CalEITC unless they earned less than $10,000 per year, a salary that equates to working just 19 hours per week at the state minimum wage (Table 2).  Families with two or more children do not qualify for the credit if they earn less than $14,000 annually, equivalent to working 27 hours per week at the minimum wage. The CalEITC expansion would allow families to work 41 hours per week at the state minimum wage to benefit from the credit. This means, for example, that the CalEITC would be available to single parents working full-time at the minimum wage (Figure 1).
Earned Income Tax Credit Parameters, 1975 2000 (dollar Amounts…
For non-eligible workers, the new CalEITC income limit will increase to $15,010. Because it is less than the full-time minimum wage wage, the credit will not be available to full-time minimum wage workers without qualifying children. Still, this higher threshold means that these workers will be able to work 27 hours per week at minimum wage and still qualify for the credit, up from just 13 hours per week to previously qualify. 
Raising the income threshold to qualify for the CalEITC would not only benefit minimum wage workers who would benefit from the credit, but would also provide the credit to workers living in or near poverty. Before the expansion, income limits for the CalEITC fell below the official federal poverty line. As a result, many workers living in poverty did not qualify for the credit. For example, single parents with one child had to earn less than about 62 percent of the poverty line to qualify for the credit. Beginning in tax year 2017, these parents can earn up to about 135 percent of the poverty line and still qualify for the credit (Figure 2). Raising the income threshold to near or above the poverty line is important because many low-income families struggle to afford basic expenses, especially in high-cost areas of the state.
The size of the CalEITC for a particular family or individual depends on how much they earn and how many children they support. Specifically, the credit “steps in” (increases) for higher levels of earnings up to a certain maximum point, then the credit “steps out” (decreases) for higher levels of earnings until it reaches $0. The budget agreement expands the CalEITC to workers above the income level by gradually expanding the credit starting at an income of $13,794 for workers with two qualifying children (Figure 3). This is the income level at which these parents are expected to qualify for the CalEITC of $250 in tax year 2017. For non-eligible workers, the budget package gradually begins the CalEITC at earnings of $5,354 — the point at which these workers are projected to qualify for the CalEITC of $100 in tax year 2017.
Most workers who were previously eligible for the CalEITC will see no change in the size of the credit, while some will receive slightly larger credits. For example, there will be no change to the credit for two qualifying children and parents with incomes up to $13,794 (Table 3). Those with incomes between $13,794 and $14,529 would qualify for slightly larger credits. For example, a parent with two children and $14,000 in earnings would qualify for an estimated $244 from the CalEITC under the expansion, up from an estimated $180 if the credit was not expanded. Workers with two children and income between $14,529 and about $22,300 will be newly eligible for the CalEITC.
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Workers who qualify for the CalEITC because of the higher income limit will qualify for a very modest credit. Eligible children will qualify for about $230 or less based on their income. For example, a worker with two children may qualify for about $214 if she earns $15,000 or $126 if she earns $18,000 (Figure 4). Under the expansion, workers who do not qualify for the CalEITC could receive about $84 or less, depending on their earnings. For example, these workers would qualify for $52 if they earned $7,000 a year or $10,000 a year.
Looked at another way, families working a total of 30 hours per week at the state minimum wage in 2017 (earning an annual salary of $16,380) would qualify for an estimated $115 from the CalEITC if they have an eligible child, and $174 if they have an eligible child. have two eligible children, or $176 if they have three or more eligible children (Table 4). If the CalEITC had not been extended in this year’s budget deal, these workers would not have qualified for the credit.
Creating the CalEITC was an important step forward in how our state helps low-income workers better afford basic necessities and move toward financial security. The 2017-18 budget agreement greatly strengthens this important tax credit by expanding it to more than 1 million additional low-income working families. Although many newly eligible workers will qualify for a very modest credit, the budget agreement lays the groundwork for strengthening the CalEITC, as state policymakers can build on these changes in future years by increasing the size of the credit that newly eligible workers can receive. .
 Institute on Taxation and Economic Policy (ITEP). Estimates of ITEP are subject to some uncertainty. This estimate is based largely on Internal Revenue Service (IRS) data on California tax filers who claim the federal EITC. However, it is estimated that only about 75 percent of Californians who qualify for the federal EITC claim the credit each year. This means that California’s federal EITC participation rate is implicitly assumed in ITEP’s estimates. In other words, it can be guesswork
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Expanding the CalEITC encourages workers who qualify for the federal EITC but who do not
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