The Earned Income Tax Credit (EITC) is put in place to help reduce poverty among working families, and to encourage employment despite low wages. At tax time, the credit can be extremely beneficial to families, as it puts more of their hard earned money back into their hands. The state of Rhode Island has enacted their own version of the credit, modeled after the federal credit.
Following the same rules for eligibility, the state EITC allows taxpayers who claimed the federal credit the opportunity to claim a state credit as well. The EITC in Rhode Island is given at 10% of the federal credit, and can be used to reduce the state income tax a family owes. The credit is also fully refundable in Rhode Island, which means that any amount over what the taxpayer owes is returned to them via a refund. Any family without tax liability can receive the whole credit amount as a refund.
In issuing a refund of the credit, the state EITC is effective in keeping poverty levels low, as the family can use the money toward other substantial state and local taxes. Refundability is the heart of the EITC, because it aims to give back to working families and make tax time just a little less stressful.