Mary is a single mother—no easy role. Raising four children on a single income in San Francisco presents problems that would challenge even the most financially secure household. Thankfully, Mary gets some much-needed help from refundable tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).
Until a few years ago, Mary was spending $225 to have her taxes done and hadn’t even received all the credits she was eligible for; then, she started having her taxes done for free every year at San Francisco Housing and Development Corporation, a partner of United Way’s Earn It! Keep It! Save It! program.
In 2014, Mary qualified for over $4,000 in EITC alone. That extra income allowed her to put down a security deposit on a new apartment for her family, take care of unpaid bills, and make payments on a reliable car to get to work. For families like Mary’s, the EITC represents a crucial benefit that not only keeps their heads above water, but prevents new financial crises from arising.
This year, for the first time, the preventive power of the EITC is going to be augmented by California’s state EITC, enacted by the legislature in 2015. The California EITC works just like the federal credit, providing an added financial boost to a worker’s tax return. A family with three or more children earning less than $13,870 a year could be eligible for up to $2,653 in state EITC. Considering that the same family could be eligible for over $6,000 in federal EITC, the new state credit will provide a substantial financial boost to working families who are struggling to make ends meet.
The challenge lies in making sure eligible families take advantage of this new financial support. Given that the income limit to qualify is relatively low, most eligible families will have little to no tax liability, making them unlikely to file a return. Overcoming this will require a vigorous outreach and education effort to connect eligible families to the credit.
United Way Bay Area will be working with regional and state partners throughout this tax season to make sure families like Mary’s know about the credit and take advantage of this crucial resource. To learn more about the state and federal EITC, check out the links below and share with your friends, colleagues, and neighbors.