Tax Cut for Workers Act of 2025

Bill Number: H.R. 2764
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Introduced
Latest Action: 2025-04-09: Referred to the House Committee on Ways and Means.
Last Updated: 2026-04-01T21:14:51Z

AI-Generated Summary

Purpose

The "Tax Cut for Workers Act of 2025" (H.R. 2764) aims to expand and make permanent certain features of the Earned Income Tax Credit (EITC), a refundable tax benefit (meaning it can result in a payment even if no taxes are owed) designed to help low- to moderate-income workers by reducing their tax burden or providing cash refunds. The bill focuses on broadening access for workers without children, increasing benefit amounts, and extending the credit to U.S. territories.

Key Provisions

Permanent Expansion for Workers Without Qualifying Children (Section 2):
Lowers the minimum age to claim the EITC from 25 to 19 for most people; 24 for students (unless they qualify as former foster youth or homeless youth); and 18 for qualified former foster youth or homeless youth.
Defines "qualified former foster youth" as individuals who were in foster care after age 14 under specified federal programs and consent to sharing related information with the IRS.
Defines "qualified homeless youth" as unaccompanied individuals who are homeless or at risk of homelessness and self-supporting, based on a certification provided to the IRS.
Removes the maximum age limit of 65, allowing older workers to claim the credit indefinitely.
Doubles the credit rate and phaseout rate (the percentage at which the credit reduces as income rises) from 7.65% to 15.3%.
Increases the base earned income amount for the credit from $4,220 to $9,820 and the phaseout starting point from $5,280 to $11,610.
Applies inflation adjustments to these amounts starting in various years (e.g., 2025 for some phaseout figures), using the Consumer Price Index (CPI, a measure of average price changes for goods and services).
Eliminates a temporary subsection limiting these rules.
Applies to tax years beginning after December 31, 2025.

Extension to U.S. Possessions (Section 3):
Makes the EITC available permanently in Puerto Rico, U.S. possessions with "mirror code" tax systems (territories that largely copy U.S. tax rules), and American Samoa, by removing the temporary limit for calendar years 2021 through 2025.

Option to Use Prior-Year Income (Section 4):
Allows taxpayers to elect to calculate the EITC using their earned income from the previous year if it was higher than the current year's, helping those with temporary income drops (e.g., due to job loss).
For joint filers (married couples filing together), combines both spouses' prior-year incomes.
Treats errors in using prior-year income as mathematical mistakes, allowing IRS corrections without full audits; does not affect other tax calculations.
Applies to tax years beginning after December 31, 2025.

Significant Changes to Existing Law

Converts temporary EITC expansions (originally set to expire after 2025) into permanent rules, particularly for childless workers who previously faced stricter age limits and lower benefits.
Expands eligibility beyond the mainland U.S. by removing time limits on EITC availability in territories, which were piloted temporarily under prior laws like the American Rescue Plan Act.
Boosts credit generosity through higher rates and amounts, effectively doubling the potential refund for eligible childless workers compared to current law.
Introduces new flexibility with the prior-year income election, which was not previously available for the EITC (though similar options exist for other credits).
Enhances inflation protections to maintain the credit's value over time, with updated base years for adjustments.

Potential Impacts

On Citizens and Workers: Could benefit millions of low-income adults without children by providing larger refunds (up to roughly double current levels, adjusted for inflation), potentially lifting more people out of poverty and increasing spending power for essentials like housing and food. Young adults (ages 18-24), seniors over 65, former foster youth, homeless youth, and those in territories would gain new or expanded access.
On Government Agencies: The IRS would need to develop processes for verifying foster care status, homelessness certifications, and prior-year elections, potentially increasing administrative costs and workload. The Treasury Department may see higher refund payouts, adding to federal spending (estimated in billions annually, though not specified in the bill).
On International Relations: Minimal direct impact, but extending benefits to U.S. territories like Puerto Rico and American Samoa could improve economic equity in these areas, indirectly supporting U.S. oversight of its insular possessions without affecting foreign relations.

Main Stakeholders Affected

Low- to Moderate-Income Workers Without Children: Primary beneficiaries, including young adults, students, older workers, former foster youth, and homeless youth who meet the new eligibility criteria.
Residents of U.S. Territories: People in Puerto Rico, American Samoa, and other possessions with mirror tax systems, who will gain ongoing access to the EITC for the first time on a permanent basis.
Joint Filers: Married couples facing income fluctuations, who can now use combined prior-year earnings.
Government Entities: The IRS (for implementation and enforcement), Treasury Department (for fiscal outlays), and state agencies involved in foster care or homelessness programs (for data sharing).
Tax Preparation Industry: Could see increased demand for services to handle elections, certifications, and territory-specific filings.

Notable Legal, Constitutional, or Political Implications

Legal: Requires IRS rulemaking to define certification processes for foster and homeless youth, ensuring privacy protections under tax laws. The consent requirement for foster youth data ties into federal child welfare laws (Social Security Act), potentially raising data-sharing compliance issues but without creating new enforcement burdens.
Constitutional: No major challenges anticipated; the bill aligns with Congress's taxing and spending powers under Article I. It promotes equal treatment under tax law by extending benefits to territories, addressing past disparities without violating equal protection principles.
Political: Represents a progressive expansion of anti-poverty measures, emphasizing support for vulnerable groups like youth in care or homelessness. Introduced by Democratic representatives, it could spark debates on federal spending and work incentives, but builds on bipartisan EITC history; permanence may encourage future adjustments but risks opposition over added costs to the federal budget.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Evans, Dwight [D-PA-3]

Cosponsors (18)

Rep. Khanna, Ro [D-CA-17], Rep. Ansari, Yassamin [D-AZ-3], Rep. Crockett, Jasmine [D-TX-30], Rep. DeLauro, Rosa L. [D-CT-3], Rep. Foushee, Valerie P. [D-NC-4], Rep. McGovern, James P. [D-MA-2], Rep. Nadler, Jerrold [D-NY-12], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Ocasio-Cortez, Alexandria [D-NY-14], Rep. Ramirez, Delia C. [D-IL-3], Rep. Sánchez, Linda T. [D-CA-38], Rep. Scanlon, Mary Gay [D-PA-5], Rep. Sewell, Terri A. [D-AL-7], Rep. Simon, Lateefah [D-CA-12], Rep. Thanedar, Shri [D-MI-13], Rep. Titus, Dina [D-NV-1], Rep. Tlaib, Rashida [D-MI-12], Rep. Horsford, Steven [D-NV-4]