WA 2025 joint 52Kswages

[feenberg]

See http://taxsim.nber.org/out2psl/986

PE shows an earned income credit of 1330. TA doesn't cover this, and I am unable to find a clear explanation of the phaseout for the WA earned income credit on 52380 of wage income and 3 dependents. I find this at https://dor.wa.gov/sites/default/files/2022-04/DRAFT_WFTC_Rule.pdf for 2022:

The applicable federal income threshold for a couple that is married filing jointly with one
qualifying child is $48,108. See Table B. This amount must be reduced by $5,000 by the
federal income threshold reduction amount, which results in a reduced federal income
threshold for WFTC of $43,108. 

but can't make sense of it. Where does the 48,108 come from? Moving to 2025, as far as I can tell, the Federal EIC begins to decline at 30550 of AGI in 2025. If we set the WA threshold at 25550 then the excess income over the threshold is 26830 and 18% of that is far higher than the maximum EIC in WA. So the amount of credit left after the phaseout is zero. But PE gives a large credit. I conclude that I don't know what the "federal income threshold" is. Can you help me out?

[DTrim99]

PE's $1,330 is correct. The WFTC isn't a percentage of the federal EITC that tracks the federal phase-out curve — it's a flat maximum by child count ($1,330 for 3+ children in 2025, per RCW 82.08.0206(3)(a)), reduced only in a narrow band at the top of the income range and floored at $50, not zero.

The "federal income threshold" is the federal EITC's completed-phaseout AGI (where the federal EITC reaches $0), not the federal phase-out start. WA freezes this to the federal rules in effect June 9, 2022. For MFJ with 3+ children that's $59,190; your $48,108 is the same figure for MFJ with one child (the draft rule's Table B), which is why it then subtracts $5,000 to get the $43,108 phase-out start.

So the phase-out runs over the last $5,000 below the ceiling: start = $59,190 − $5,000 = $54,190, declining at (1,330 − 50)/5,000 = 25.6% down to the $50 floor, then cutting off entirely above $59,190. At $52,380 of wages you're below the $54,190 phase-out start, so the full $1,330 applies — no reduction. (RCW 82.08.0206(3); WA HB 1888 directs DOR to set the rate so the minimum is reached at the maximum qualifying income.)

[feenberg]

Can you refer me to a more complete explanation? I understand your explanation of the phaseout, the .15 and .18 are no longer involved in calculating the credit. But does the credit start at 1330 regardless of earnings? Suppose I have only 2,000 in earnings, does the phaseout still start by subtracting from 1330, hence being the full 1330 unless other income is very large? (I assume the phaseout is based on income, not earnings).