Which program is a refundable tax credit for low- to moderate-income workers?

• A. EITC
• B. SSI
• C. TANF
• D. Medicaid

Answer: (A)

The concept being tested is identifying a refundable tax credit that directly boosts take-home pay for workers with low to moderate income. The Earned Income Tax Credit fits this role perfectly. It’s a refundable credit, meaning it can produce a refund even if you don’t owe any tax. As you earn income through work, the credit increases, then phases out as earnings rise, potentially lowering your tax bill to zero and still leaving money back to you as a refund if the credit is larger than what you owe.

The other programs are not tax credits. Supplemental Security Income, Temporary Assistance for Needy Families, and Medicaid are welfare and health coverage programs, funded through general federal and state resources, not refundable tax credits you claim on a tax return. They provide benefits or coverage based on need, rather than reducing tax liability or issuing a refund through the tax system.