 Most of this information can be found in the Form 1040 Instructions Tax Year 2022. You can find it at the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're at the bottom half looking at the credit section. Remembering the first half of the income tax formula is in essence an income statement. Although a strange one, ending at taxable income, similar to the bottom line of an income statement, net income. We're going to calculate the tax on that, not using a flat tax, not multiplying by one rate in other words, but using a progressive tax structure to get to the tax before credits and other taxes. Then we're going to deal with the credits and other taxes, possibly self-employment tax, for example. And then we're going to have the amounts that we paid in that we're going to deal with which is going to be in the form of estimated tax payments or withholdings to finally get to the tax refund or tax due. Also remember when we look at these credits, that they're similar to deductions and that we like both credits and deductions. However, if we had one dollar credit versus one dollar deduction, we typically want the credit because the credit will maximize that full dollar worth of benefit typically, whereas the deduction will simply reduce the taxable income, which is good, but will only get a benefit based on our tax rate. Also remember that these credits are broken out into non-refundable and refundable components generally, and that is because a non-refundable credit will not take us below zero is the general idea with the tax liability. The refundable credits are a component that's really beyond taxes. They're using the tax code as a benefit program to get quote a refund, end quote, when it's not really a refund, it's kind of like a benefit program. So we have that concept of refundable and non-refundable credits. Now when we think about the earned income credit, remember that most economists really like the earned income credits because it tries to incentivize work. The credit actually goes up as you have earned income up to a certain threshold and then it goes back down. So you really want to think of the credit as kind of a curve. It's going to go up as your income goes up and then the maximum credit goes down at some point in time once you maximize out the curve. And then there's different curves depending on how many children we have, for example. So although the earned income credit has a good characteristic that it tries to incentivize work, it is also quite confusing in attempting to incentivize work. That's one of the problems with a lot of these lower income focused types of credits. The problem is that they actually backfire a lot of times. Instead of helping people get on their feet and be self-sufficient, they actually lock people into being dependent on the credit or whatever the benefit program is because once they start earning income and becoming self-sufficient, they lose the benefits entirely and they're actually better off with the benefits than earning income, which isn't good. So what the credit should be designed to do, you would think, is to be something that's going to help people become self-sufficient. And that's what the credit tries to do, but you can see how complicated it also makes the credit. So for example, if we look at a common table like this, it says the number of children on the left, we can imagine a different curve per number of children, which are going to be a factor involved. We'll get into this in more detail in a second, but just an overview of a chart you commonly see. Then we have the maximum earn income tax credit if you have zero children, which is much lower than, of course, the maximum of the three children that you can get, which is quite a substantial credit, $6,935 versus $560. Now if you had zero children, the max AGI single or head of household filers, meaning your income threshold, your adjusted gross income, if it goes over $16,480, you basically are no longer able to get the credit. But note that that number is generally represented as the threshold where you don't get any of the credit anymore. And what we really want to also see is where does the credit become maximized? At what income level is it going to hit its peak at $560? And then also the level that it's going to go back down to zero. We're not going to get any benefit. And then for the max AGI for married, it's $22,610. So it's pretty low for no children, your AGI threshold. If you have one child, the maximum credit is $3,733. The max AGI single or head of household is $43,492, which is a fairly significant level. But again, that's the top level where it phases out basically completely generally. Instead of the peak, where's the peak of the curve? Where's my AGI maximized where I'm going to get that $3,733? And then it's $49,622 for married filing joint, two filers, the maximum goes up significant or two children. The maximum goes up significantly to $6,164. The max AGI is $49,399. Same caveat for married, $55,529. And over three children, notice it caps at three, so no more benefits for the earned income tax credit for more children past three. The maximum credit could be $6,935 for the income of $53,057. But that's the maximum. Again, the maximum before you lose the credit entirely, not the point in time that you would be maximizing the credit and then $59,187 for married filing joint filers. All right, so that's the general table you typically see. Let's get into it in a little bit more detail.