The federal EITC was first enacted in 1975. Its purpose has been to offset the burden of payroll and Social Security taxes while promoting employment. It rewards lower-income families by providing a tax credit based on earnings. Because these families often pay little or no income taxes, the EITC is a refundable credit. This credit is determined by total family income. Only the custodial parent can claim the credit, and children must be 18 years old or younger to qualify.