Final answer:
The earned income tax credit (EITC) is a tax credit that assists the working poor. It provides a financial incentive for low-income wage earners to work rather than rely on governmental aid. Dependent taxpayers, self-employed individuals, and those eligible for the EITC can benefit from this credit.
Step-by-step explanation:
The earned income tax credit (EITC) is a method of assisting the working poor through the tax system. It is a tax credit that some low-income wage earners are eligible to receive. The EITC is intended to make employment at low-wage jobs more financially rewarding and provide a stronger incentive to work rather than rely on governmental assistance.
Dependent taxpayers, self-employed persons, and taxpayers eligible for the EITC can benefit from this credit. For example, a single parent with two children could receive a tax credit of up to $5,372 if their income is below a certain threshold. The amount of the tax break increases with the amount of income earned, up to a point.
In 2013, approximately 26 million households took advantage of the EITC at an estimated cost of $50 billion, making it one of the largest assistance programs for low-income groups.