MSU Extension discusses federal and Montana earned income tax credits

According to Montana State University Extension, some Montanans can qualify for state and federal tax credits that may provide funds for working families with children who have faced dire financial consequences during the COVID-19 pandemic.

Marsha Goetting, MSU Extension family economics specialist, said Montanans should look into the earned income tax credit, the federal government’s largest program for helping working Americans. Created in 1975, the EITC is a refundable federal income tax credit for low- to moderate-income workers. When the EITC exceeds the amount of taxes owed, Goetting explained, the result is a refund to eligible taxpayers who claim and qualify for the credit. 

“For 2020 the earned income tax credit at the federal level ranges from $548 to $6,660,” Goetting said. “The amount depends on income and number of children.”

If individuals’ earned income was higher in 2019, they can use the 2019 amount to figure their federal EITC for 2020. This temporary relief is provided through the Taxpayer Certainty and Disaster Tax Relief Act of 2020, Goetting said.

For 2019, earned income and adjusted gross income at the federal level must each be less than $50,162 — $55,952 married filing jointly — with three or more qualifying children; $46,703 — $52,493 married filing jointly — with two qualifying children; or $41,094 — $46,884 married filing jointly — with one qualifying child.

For the Montana EITC, Goetting said, the basic qualifying rules state that individuals must have investment income below $3,650 in the year they claim the credit, must have a valid Social Security number and be a U. S. citizen or a resident alien for the entire year. In order to claim the credits, individuals have to file both a federal 1040 form and Montana Individual Income Tax Return, also known as Form 2.

“For most people in Montana, the state EITC is worth 3% of the federal EITC claimed,” Goetting said. “The credit is refundable, meaning that if it exceeds the total amount of taxes you owe, you will receive the difference.”

For those who are unsure whether they can claim the EITC, use the EITC assistant from the IRS at irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-assistant.