What is an Earned Income Tax Credit & 3 Ways it Can Level-Up Your Finances Johnny Monroe February 27, 2023 • 4 Minute Read Taxes Congratulations, you made it through another tax season! It's always a relief to file your taxes and wait for that much-needed tax return. But before you start planning that lavish vacation or buying a new gadget, let's talk about the Earned Income Tax Credit (EITC) and the smartest ways to spend your tax return. What is an Earned Income Tax Credit? The Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate-income individuals and families. It is designed to help offset the burden of Social Security taxes and provide a financial boost to those who need it most. To qualify for the EITC, you must have earned income, be a U.S. citizen or resident alien, and meet specific income requirements. The credit amount varies depending on your income level, filing status, and the number of qualifying children you have. 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If you don't have an emergency fund, consider using your tax return to start one. Put the money in a high-yield savings account, and make sure it's easily accessible when you need it. 3. Pay off large debt. If you have high-interest debt, like credit card balances or student loans, paying it off should be a top priority. High-interest debt can quickly spiral out of control, making it harder to get ahead financially. Using your tax return to pay off debt can save you money in the long run by reducing the amount of interest you'll pay over time. Make a plan to pay off your debt strategically, focusing on the highest interest rates first. Your tax return can be a great way to improve your financial situation, but it's essential to use the money wisely. Rebuilding your credit, creating an emergency fund, and paying off debt are three of the smartest ways to spend your tax return. By taking these steps, you can get ahead financially and set yourself up for a more secure future. 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