This Important Tax Credit Will Be Worth More Money in 2023

It could put more money in your pocket.

There's a reason tax-filers are advised to claim every single tax credit they're entitled to. A tax credit is a dollar-for-dollar reduction of your tax liability. If you owe the IRS $1,000 but claim a $1,000 credit, that negates your financial obligation. Pretty sweet, huh?

Now many tax credits are non-refundable, so the most they can do is reduce your tax bill to $0. If you owe the IRS $0 and claim a $1,000 non-refundable credit, nothing happens. But if you claim a $1,000 refundable tax credit in that situation, the IRS will have to send $1,000 into your bank account.

Meanwhile, one fully refundable tax credit that's been around for a long time is designed to help lower-income taxpayers. It's called the Earned Income Tax Credit, or EITC, and its maximum value can change from year to year. Eligibility rules can change as well.

In 2023, the EITC will undergo some big changes. And it's important to know what those are.

Qualifying for the EITC in 2023

To be eligible for the EITC, your income needs to fall below a certain threshold. That threshold is based on the size of your household. You can look at this table to see what the income limits are for the EITC in 2023:

These limits are all higher than what they were in 2022, so you get a little more leeway in qualifying for the EITC next year.

How much money will the EITC pay you?

The amount of money you're eligible for via the EITC will also hinge on your household size. Here's what to expect:

No matter your household size, if you qualified for the EITC this year, the maximum value of the credit will be higher for you in 2023 (assuming your household size stays the same). So that's a nice windfall to look forward to.

And remember, the IRS will give you your money for the EITC even if you don't owe taxes. That's why it's so important to file a tax return, even if your income is low enough that you're not required to. Many people routinely miss out on the EITC for this reason -- they're not obligated to file a tax return, so they skip it and don't claim their money.

If you're part of a lower-income household, you're generally able to file your taxes electronically for free. You may also be entitled to free tax help.

Many households are struggling a lot this year due to surging inflation. If you're one of them, it pays to get your hands on all of the money you're entitled to. And keeping tabs on EITC changes could help you plan for a payday that helps you shore up your finances and cover your bills with less stress.