The EITC and Child Tax Credit together lifted 10.6 million people above the SPM poverty line and made poverty less severe for 17.5 million others in 2018. Research shows that families mostly use the EITC to pay for necessities such as food and housing, and in some cases, for education or training to boost their job prospects and earning potential. ![]() The EITC is “refundable,” meaning that if the value of the credit exceeds the amount of federal income tax a low-paid worker owes, the worker receives the difference in the form of a refund. As the figure below shows, workers receive the credit beginning with their first dollar of earned income the amount of the credit rises with earned income until it reaches a maximum level and then phases out at higher income levels (see tables 1 and 2). The amount of the EITC depends on a recipient’s income, marital status, and number of children. (See below section, “Fixing the Meager EITC for Workers Not Raising Children.”) The American Rescue Plan expanded the EITC for this group for 2021 only. During tax year 2020, for example, the average EITC for a filer without children was just $295. Working adults who aren’t raising children at home and had incomes below $17,640 if they are unmarried ($24,210 for a married couple) in 2023 can receive a very small EITC. During the 2020 tax year (the latest year for which these IRS data are available), the average EITC was $3,099 for a family with children. When filing taxes for 2023 (due in April 2024), working families with children that have annual incomes below about $46,600 to $63,400 (depending on marital status and number of dependent children) may be eligible for the federal EITC. US tax filing for expatsĪll Americans, including expats, are required to file a federal return, reporting their global income.In the 2020 tax year, 25 million working families and individuals in every state received the EITC. The Child Tax Credit remains $2,000 for all three years, with the refundable part that many expat parents can claim as a payment also staying the same at $1,400 per child. The Foreign Earned Income Exclusion threshold for 2018 was $103,900. The 2018 Standard Deduction amount was $12,000. To claim the Foreign Earned Income Exclusion, expats have to file Form 2555 when they file their federal return. The Foreign Earned Income Exclusion is one of the primary ways that expats can avoid paying US taxes, as it lets them exclude up to the first around $100,000 of their earned income from US tax. “The Internal Revenue Service (IRS) has announced the annual inflation adjustments for the year 2020, including tax rate schedules, tax tables and cost-of-living adjustments.” – Forbes ![]() Tax brackets have been adjusted for inflation however as follows: 2018 20 tax rates and bracketsĪlthough most expats don’t end up owing US taxes, as long as they file a federal return and claim one or more of the exclusions and credits available to them, some expats do owe US tax, and they should note that US income tax rates aren’t changing in either 2019 or 2020. The rates for 2019 tax year for filing in 2020 were actually announced a while ago. These will be applied to the year from January 1st to December 31st 2020, the 2020 tax year, for which expats (along with Americans living stateside) will file in 2021. Last week the IRS announced the new figures for 2020. Each year the IRS adjusts tax brackets, the Standard Deduction, and exclusion thresholds for inflation.
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