“To amend the Internal Revenue Code of 1986 to expand the earned income and child tax credits, and for other purposes.”
No CRS summary available for this bill.
This section establishes the short title of the Act as the “Lower Your Taxes Act” and sets forth the table of contents.
This section expands the earned income tax credit (EITC)—a refundable tax credit for low- and moderate-income workers based on earned income and qualifying children—for taxable years beginning after December 31, 2025, through the following changes to IRC §32(b)(1)–(2): (1) doubles most credit percentages—to 35% (from 7.65%) for no qualifying children, 90% (from 45%) for three or more, 80% (from 40%) for two, and 68% (from 34%) for one; (2) reduces phaseout percentages—to 7% (from 7.65%) for no qualifying children, 10% (from 15.98% or 21.06%) for one or more, and 7% (from 7.65%) in another entry; (3) increases earned income amounts at which maximum credit is reached—to $19,000 (from $6,330), $27,000 (from $8,890), and $15,000 (from $4,220); (4) increases phaseout amount thresholds—to $30,000 (from $11,610, in two places) and $15,000 (from $5,280); and changes the joint return adjustment from an additional $5,000 to twice the phaseout amount under §32(b)(2)(A). The section further (5) lowers the age requirement for taxpayers without qualifying children to age 18 or older (from age 25 but under 65); (6) establishes a Treasury notification program, for taxable years beginning after 2025, to inform likely-eligible individuals (based on IRS data) who did not claim the EITC; and (7) provides for inflation adjustments to earned income and phaseout amounts (using per capita GDP growth from 2025) and to the excessive investment income limit (using cost-of-living adjustment from 2020).
This section establishes a program requiring the Secretary of the Treasury to make annual payments to eligible individuals (i.e., those claiming a non-refundable state earned income tax credit after 2025) equal to the state refundable earned income tax credit equivalency amount (i.e., such credit if unlimited by tax liability, minus the reduction in state tax liability from the credit). Eligible states are those with a qualifying non-refundable earned income tax credit (i.e., based on earned income and limited to tax liability) in effect on enactment that enter data-sharing agreements with the Secretary (excluding credits modified to maximize payments or not scheduled to continue). Such payments are treated as refundable federal income tax credits, with attributable refunds treated under 31 U.S.C. §1324(b)(2) (i.e., disbursable from the permanent appropriation for IRS refunds of specified credits).
This section establishes a new refundable child tax credit under new IRC §24A (inserted after §24) equal to the sum of monthly specified child allowances for qualifying children under age 18 who share the taxpayer's principal place of abode for more than half the month and meet other qualifying child criteria (e.g., receive uncompensated care from the taxpayer). The monthly allowance is $350 per child under age 6 and $300 ($3,600 annually) per child ages 6-17, phased out at a 5% annual rate based on modified adjusted gross income (MAGI) starting at an initial threshold of $150,000 (joint return or surviving spouse) or $112,500 (other filers, half for married filing separately); through 2025, the initial phaseout is limited and followed by a secondary phaseout starting at $400,000 (joint), $300,000 (head of household), or $200,000 (other filers). Dollar amounts inflate after 2025 based on CPI (to nearest $10 for allowances, $5,000 for thresholds), and MAGI may be based on the current, prior, or second-prior taxable year if elected. This section also amends 31 U.S.C. §1324(b)(2) to authorize disbursements of refunds for this credit from the standing appropriation for refunding internal revenue collections (adding §24A to the list of specified credits).
This section limits the preferential tax rates on net capital gains (i.e., maximum rates of 0%, 15%, or 20% rather than ordinary income rates of up to 37%) to taxpayers whose taxable income does not exceed $1,000,000 ($500,000 for married individuals filing separately) for taxable years beginning after December 31, 2025. (Thus, net capital gains for taxpayers exceeding those thresholds are taxed at ordinary income rates.) The $1,000,000 amount is adjusted for inflation for taxable years beginning after 2026 under the cost-of-living adjustment mechanism in IRC §1(f)(3) (using 2025 as the base year and rounded to the next lowest multiple of $50).
This section increases certain corporate tax rates applicable to taxable years beginning after December 31, 2025, as follows: (1) the corporate income tax rate to 28% (from 21%); (2) the excise tax on corporate stock repurchases to 4% (from 1%); and (3) the corporate alternative minimum tax rate to the sum of 15% of adjusted financial statement income not exceeding $5 billion plus 25% of such income exceeding $5 billion (from 15% of adjusted financial statement income).