Income Tax Refunds

Federal Tax Refunds

Federal tax credits and refunds are exempt as a resource for 12 months from the date of receipt. This exemption applies to both applicants and recipients. They are NOT considered as income.

State Tax Refunds

State Tax Refunds are considered property upon receipt and must be evaluated as such. They are NOT considered as income.

Clients should be:

Encouraged to apply for tax refunds, but cannot be discontinued if they fail to do so.
Advised that their eligibility may be affected if they receive an amount which, in combination with their other property, exceeds the property limit.

Renter's Credit

Renter's Credit is exempt as income.

Renter's Credit is considered as property upon receipt.

Earned Income Tax Credit (EITC), aka Earned Income Credit (EIC)

EITC is exempt as income, whether received as advance payments or as a single payment at the end of the tax year.

EITC is exempt as property for 12 calendar months starting with the month that the payment is received.

ExampleExample A client was employed during the year. She filed for both her State and Federal Income Tax Refunds. On February 10th, she received $563 from the State. On February 18th, she received $1,478 from the IRS. This included $762 EITC. She reported this on her February SAR 7, received March 3rd. She still has $1,235 left in her savings account. The EW would not consider any of these funds to be income. All but the EITC is counted as property. The EW would use the balance of $1,235, less the $762 EITC (which is exempt for 12 months following the month of receipt), to determine the amount of property she had on April 1st. This would mean that she had $473, plus any other property counted in April.

The tax credits listed below have no effect on public benefits.

Federal EITC and California EITC (CalEITC)

The Federal EITC and CalEITC are both tax credits available to recipients with earnings. Qualifying individuals may be eligible for cash back or a reduction of the taxes owed.

Individuals qualifying for the Federal EITC may also qualify for the Federal Child Tax Credit and the Credit for Other Dependents, Child and Dependent Care Credit, and Education Credits.
The CalEITC may also enable an individual to qualify for the Young Child Tax Credit (YCTC) and Foster Youth Tax Credit (FYTC).

Both the Federal EITC and CalEITC income limits for eligibility and the maximum credit amounts are adjusted annually in response to changes in the cost of living according to state and federal standards.

Eligibility Rules

California tax filers may qualify for state or federal credits, or both, depending on their income, age, and number of children, if any. The state and federal EITCs have the same general eligibility rules:

Have earned income and adjusted gross income within certain limits; federal adjusted gross income can be $0, but earned income must be at least $1,
Meet certain Internal Revenue Service (IRS) EITC basic rules (e.g., have a Social Security Number (SSN) for EITC or SSN/Individual Taxpayer Identification Number (ITIN) for CalEITC, etc.),
Meet qualifying child rules, if any dependent children are claimed, and
Live in California (for CalEITC) or in the United States (for Federal EITC) for more than half the tax year.

California tax filers may qualify for state credits even if they do not qualify for federal credits. CalEITC is available to qualifying tax filers ages 18 and older or any age with qualifying children.

Publications

The It's Your Money - Get It - The State and Federal Earned Income Tax Credit (EITCs) (PUB 428 and PUB 429) provide information about EITCs and how to get free tax help.

The PUB 428 is in a Z-fold brochure format, and the PUB 429 is a one-page flyer. Both publications have the same information.

Informing Requirements

EWs are required to inform clients about the potential eligibility for EITCs and free tax preparation and filing services using government filing tools and resources.

Note: The PUB 429 is included in the Intake and Redetermination (RD) Informational Packets via a link on the Informational Notices (SCD 2304).

State: Foster Youth Tax Credit (FYTC)

For taxable years beginning on or after January 1, 2022, eligible current and former foster youth (FFY) who file their California state tax return and claim the FYTC will receive a refundable tax credit.

An individual may qualify for FYTC if they meet all of the following criteria:

Qualify for CalEITC,
Were age 18 through 25 at the end of the tax year,
Were in foster care at age 13 or older and placed through the California foster care system, and
Satisfy foster care verification requirement.

State: Young Child Tax Credit (YCTC)

To qualify for the YCTC, families must:

Have at least one qualifying child under 6 years old at the end of the tax year,
File a California state tax return, and
Meet the requirements of the CalEITC.

As of tax year 2022 forward, taxpayers do not need to have earned income to be eligible. However, eligible families must otherwise meet CalEITC and YCTC requirements.