Summary

Permanently expands the earned income tax credit (EIC) for people who do not have qualifying children by lowering the minimum age for many young adults, creating special lower ages for certain foster and homeless youth, removing the prior maximum age limit, and changing the credit and phaseout rules (with indexing for inflation). It also changes how the EIC applies in certain U.S. territories and permits a taxpayer to elect to use prior year earned income for the EIC when current-year earned income is lower. The changes apply to taxable years beginning after December 31, 2025.

Key Points

• Expands eligibility for the EIC for people without qualifying children by lowering minimum ages and removing the maximum age limit.
• Creates special, lower minimum ages for certain foster and homeless youth to claim the EIC.
• Adjusts the credit amount and phaseout schedule for childless workers and requires those amounts to be indexed for inflation.
• Changes how the EIC applies in Puerto Rico, mirror-code possessions, and American Samoa by striking specified language in the Internal Revenue Code.
• Allows a taxpayer to elect to use prior-year earned income for the EIC if current-year earned income is lower, with rules for joint returns.
• Incorrect uses of the prior-year income election are treated as mathematical errors to simplify IRS corrections.
• Most provisions (including the election and eligibility changes) apply to taxable years beginning after December 31, 2025.
• Imposes new administrative work for the IRS and tax preparers to implement elections, eligibility changes, and indexing.
• The measure likely increases refundable credits to many low-income adults without children, but exact revenue impact depends on amounts and thresholds not shown here.

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