Sponsors (2)
Introduced January 13, 2025 by Blake D. Moore · Last progress January 13, 2025
The bill expands and clarifies refundable EITC benefits and strengthens preparer penalties to help low‑income workers and protect program integrity, but it simultaneously removes head‑of‑household and dependent exemptions and introduces complex filing changes that will raise taxes and compliance burdens for many families during the transition.
Low-income workers with qualifying children — and some childless single filers — will receive larger or newly refundable Earned Income Tax Credits because credit caps and earned‑income/phaseout amounts are increased and new alternative caps are added.
Taxpayers benefit from clearer inflation‑indexing rules that help preserve the real value of the credit amounts over time by specifying how those amounts adjust each year.
Taxpayers and the Treasury may see fewer improper EITC claims because preparers face a tighter $500 due‑diligence penalty, strengthening program integrity.
Single parents and many families with dependents will likely face higher federal tax liabilities and lose some tax benefits because the head‑of‑household filing status is removed and the dependent exemption is eliminated.
Removing head‑of‑household references and altering filing categories for other credits (for example, the Premium Tax Credit) could make some taxpayers ineligible for those credits or reduce the amounts they receive.
New separate‑application rules for 'exempted' versus non‑exempted children and multiple filing‑status changes will increase tax preparation complexity and raise compliance costs for families.
Based on analysis of 2 sections of legislative text.
Revises EITC dollar caps, phaseouts, joint-return rules, and inflation indexing to change credit amounts and eligibility starting in 2026.
Changes the earned income tax credit (EITC) by raising and restructuring credit limits, phaseout ranges, joint-return treatment, and inflation-adjustment rules, and updates related dollar tables used to compute the credit. The changes take effect for taxable years beginning after December 31, 2025, and directly alter Internal Revenue Code provisions that determine EITC eligibility and amounts.