The Lower Your Taxes Act is a broad tax-policy package that would dramatically expand the earned income tax credit (EITC), create new ways for taxpayers to receive credits (including monthly advance child credits), and extend refundable treatment to state nonrefundable child and dependent credits through a federal payment program. It also contemplates additional changes to capital gains and corporate tax policy (sections 6-7), and directs the executive branch to pursue federal deficit reduction, while establishing various administrative and anti-fraud safeguards. The bill would apply to fiscal years and tax years beginning after 2025, with phased-in adjustments and inflation indexing rules starting in later years. Notably, the bill’s text provided here focuses on the EITC expansion, the refundable treatment of state credits, and the new monthly child credit; details for some sections (e.g., Sec. 6 and Sec. 7) are referenced but not fully included in the excerpt. In practical terms, if enacted, more low- and moderate-income workers could receive larger and more accessible credits, families could receive regular monthly cash support for children, and some state credits would flow to eligible taxpayers as federal cash payments. The plan also introduces new rules to guard against improper claims and fraud and to coordinate with U.S. possessions and territories.
Key Points
- 1Expanded Earned Income Tax Credit (EITC)
- 2- EITC credit percentages would rise substantially (e.g., from 34% to 68%, 40% to 80%, and 45% to 90% for different earned-income tiers) with the credit percentage amount set to 35% in the corresponding column.
- 3- Phaseout rates and income thresholds are dramatically increased; joint-filer thresholds are adjusted, and the phaseout logic is changed so that joint returns can receive higher phaseout amounts (twice the single-filer amount).
- 4- Earned income amount and phaseout limits are increased (e.g., earned income amount from $6,330 to $19,000; phaseout thresholds from $11,610 to $30,000, etc.).
- 5- Inflation indexing is redesigned: after 2026, EITC amounts and phaseouts would be adjusted via a GDP-based expansion measure; there are specific provisions for adjustments to excessive investment income with a cost-of-living type adjustment.
- 6- Age eligibility is broadened (replacing a prior 25-to-65 age window with eligibility starting at 18).
- 7- Treasury notification program: starting after 2025, the Treasury would notify individuals likely eligible for the EITC.
- 8State Non-Refundable EITC as Refundable Payments (Sec. 4)
- 9- The Secretary would run a program to provide annual payments to eligible individuals equal to the “State refundable earned income tax credit equivalency amount.”
- 10- An “eligible state” must have an existing state non-refundable EITC and enter an agreement to share information with the Secretary.
- 11- The payment is treated as a federal tax payment; any overpayment due to the deemed payment would be refunded.
- 12Refundable Monthly Child Tax Credit (Sec. 5)
- 13- A new monthly refundable credit (Monthly Child Tax Credit) is established, providing monthly allowances for each qualifying child.
- 14- Monthly allowances: $300 per month for each child who will be at least 6 by month-end, and $350 per month for each child under 6 at month-end.
- 15- These monthly amounts are reduced for higher modified adjusted gross income (MAGI) by 1/12 of 5% of MAGI in excess of specified initial and secondary thresholds, with pre-2026 limits set to specific dollar tests and phaseouts.
- 16- Thresholds for state-related phaseouts are defined (initial threshold amounts and secondary thresholds vary by filing status; joint returns have higher thresholds).
- 17- Inflation adjustments: after 2025, monthly allowances and related threshold amounts are adjusted by CPI; pre-2026 adjustments have distinct rules, including rounding provisions.
- 18- Specified child and care tests: a defined set of criteria determines who is a specified child (abode, age, care provided, relationship, citizenship/residency). There are tie-breaker rules for which parent or caregiver claims a child if multiple households could qualify.
- 19- Payments can be claimed as a refundable credit, subject to identification requirements for qualifying children and taxpayers.
- 20- Anti-fraud and recapture rules: substantial provisions prohibit credits or advance payments when fraud or reckless disregard is found, and there are recapture rules if advance payments exceed the allowed credit.
- 21Administration and Protections
- 22- Identification requirements for qualifying children and taxpayers to prevent improper claims.
- 23- Recapture and compliance provisions address fraud, improper claims, coordination with possessions and territorial tax systems, and cross-border considerations.
- 24- Provisions for presumptive eligibility, temporary absences, and rules similar to section 152-e (divorced/separated parents) to determine eligibility.
- 25Other Provisions Highlighted
- 26- Sense of Congress: net revenues from the Act should be used to reduce the federal deficit to the extent possible and then reduce the national debt.
- 27- Possessions and territories: coordination rules for Puerto Rico, American Samoa, and other possessions, including mirror-code treatment and distributions.