money Young workers may see $800 more in their tax refunds this year
Many young workers may get an extra $820 in their tax refund this year because of the expansion of a key poverty-fighting credit, a new analysis found.
The expanded Earned Income Tax Credit (EITC) will reach more than 1 in 3 young adults this year, according to the report from the Institute on Taxation and Economic Policy (ITEP), totaling 5 million workers and 37% of the childless young adult population aged 19 to 24.
The actual benefit may be higher or lower than the average, ranging from $600 to $1,060, depending on which state a worker resides in.
The extra money could help these young individuals who are just starting out and often working in low-paying jobs.
“Young adults face the highest poverty rates of any age group in the United States,” said Aidan Davis, senior state analyst at ITEP and author of the report, “and are in dire need of the added economic security that the credit can provide during this transformative phase of their lives.”
The American Rescue Plan passed last March changed the tax code so that workers 19 to 24 years old could qualify for the EITC for the 2021 tax year — thanks to an expansion of its eligibility requirements. In the past, the EITC was only available to workers ages 25 to 64 with no dependents.
Historically, when these tax laws were enacted the reasoning was that families with kids are the most needy, so childless young workers were excluded.
“This group is typically left behind,” Davis said. “Inflation is impacting this group…coming out of college or technical school with student loan debt and low-paying, low-wage jobs.”
Young workers may also be responsible for taking care of siblings or relatives due to COVID, but can’t claim them as dependents.
Other key eligibility requirements have changed. For those attending school part time, the eligibility age is now 24, down from 25. The age is also reduced to 18 for young people who are former foster children and homeless youth.
“The credit is one of the nation’s most significant and effective anti-poverty programs,” Davis said, “helping workers meet their basic needs in the short run while also bolstering their long-run economic security.”
The expansion of the credit is for the 2021 tax year only. Its extension to 2022 was part of the Democrats’ Build Back Better legislation that so far has failed to pass through Congress
“The EITC and other credits like the Child Tax Credit will not solve inequality,” said Davis, who hopes that the credit’s expansion is revived on Capitol Hill. “But they are shining examples of how the nation can use the tax code to provide some balance to a system that’s been tilted in favor of the highest-income households.”
Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda
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