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California's new tax credit for the working poor: how many qualify?

The old-fashioned way to file your taxes. As April 15 approaches, California taxpayers have more technologically advanced — and free — options.
The old-fashioned way to file your taxes. As April 15 approaches, California taxpayers have more technologically advanced — and free — options.

This is the first year that Californians can file for a new earned income tax credit from the state.

Lawmakers approved the credit last year, and set aside 380 million dollars to cover it.

Like the federal Earned Income Tax Credit (EITC), California's is designed to help the working poor. But unlike the federal credit, the income threshold for California's is so low, some might wonder if many workers will qualify.

As they say over at APM's Marketplace, let's do the numbers:

To get the credit, a single Californian with no children must earn less than $6,580 per year.

A worker with two children must earn less than $13,870.

The credit can be as low as $214, but as high as $2,653.

The income thresholds are far higher for the federal EITC, and the federal credits are far more generous. But a family with three children that qualifies for both state and federal could wind up with credits totaling up to nearly $9,000. 

Number of Children Maximum Income CalEITC Federal EITC
None $6,850 $214 $503
1 $9,880 $1,428 $3,359
2 $13,870 $2,358 $5,548
3 or more $13,870 $2,653 $6,242

Just how many Californians qualify for the new California EITC? A coalition promoting the credit puts the number at 600,000 families. Of them, more than 100,000 are in Los Angeles county. 

Census figures suggest there could be even more Angelenos who qualify. The most recent American Communities Survey (2014) shows that 12.4 percent of Los Angeles county households make less than $15,000 per year. With 3.2 million households total in the county, nearly 400,000 of them are  bringing in under $15,000 per year. 

Advocates and state agencies want to get the word out about California's new credit because they worry that many who qualify won't take advantage of it. In order to claim the credit, you must file a state tax return, and many very low-income earners have not been required to file a state return in the past. 

Aaron Martinez, a tax adviser with H&R Block said if they skip filing the state return this year, they could potentially miss out on some good money. 

"In past years, they didn't file the California return because they weren't going to get a refund," he says. "Now, somebody with three children can get $2,653 extra that they've never gotten before." 

While Martinez recommends consulting a professional tax preparer like himself, he points out that in trying to promote the new credit, a coalition of state agencies, business groups and non-profits is supporting free tax prep services for those in need. 

Since the state tax credit is brand new, Martinez now has the memory of preparing a return for his first client to qualify for it: a single mom with two kids. 

"She got over $2,000 from California, and I don't know who was more excited: me or her," he said. "We started high-fiving. It was so much fun. That really makes my job a blast."