All-Americans Tax Relief Act of 2025

Bill Number

H.R. 2927

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-04-17: Referred to the House Committee on Ways and Means.

Last Updated

2025-05-13T18:56:21Z

AI-Generated Summary

Purpose of the Legislation

The All-Americans Tax Relief Act of 2025 aims to provide tax relief to individuals and families, particularly those with lower to middle incomes, by expanding credits, introducing new deductions, and adjusting tax rules. It focuses on supporting working families, reducing the tax burden on everyday expenses like childcare, commuting, and rent, while increasing taxes on capital gains to help offset costs.

Key Provisions

• Expansion of Earned Income Tax Credit (EITC): Increases the credit percentage (e.g., 38% for one child, up to 45% for three or more) and phaseout percentage adjustments. Raises maximum earned income amounts (e.g., $15,000 for one child, $20,000 for two or more) and phaseout thresholds (e.g., $47,120 for joint filers). Includes inflation adjustments starting after 2027.
• Child Tax Credit (CTC) Made Fully Refundable: Provides up to $2,000 per qualifying child under age 17 (first three children) and $500 for additional children. Fully refundable (can result in a payment even if no tax is owed). Phases out starting at $110,000 for joint filers ($75,000 for singles). Requires Social Security numbers and includes rules for prior improper claims. Applies to U.S. territories like Puerto Rico and American Samoa with special payment mechanisms. Inflation-adjusted after 2025.
• Medical Expenses Deduction: Removes the current 7.5% of adjusted gross income (AGI) threshold (the minimum amount of expenses needed to qualify for deduction). Allows this deduction even for taxpayers who do not itemize (list individual deductions on their return).
• Daycare Expenses Deduction: New above-the-line deduction (reduces AGI directly) for tuition paid for dependents under age 7 at licensed childcare facilities.
• Commuting Expenses Deduction: New above-the-line deduction for public transit costs to work (at least 20 hours/week on average). Limited to those with modified AGI under $250,000 (joint) or $125,000 (single).
• Tutoring Expenses Deduction: New above-the-line deduction up to $2,500 for tutoring services (small groups, focused on core subjects) for dependents in public or charter schools eligible for federal education aid.
• Credit Card Interest Payments Deduction: New above-the-line deduction up to $2,500 for interest on credit card debt.
• Rent Deduction for Primary Residence: New above-the-line deduction for rent paid on main home, phasing out above $150,000 AGI (joint) or $75,000 (single).
• Exclusion of Discharge of Indebtedness: Forgiven debt (e.g., from bankruptcy or loan settlement) is no longer taxable income for all individuals, regardless of insolvency status.
• Increase in Capital Gains Rate: Raises the top long-term capital gains tax rate (on profits from selling assets held over a year, like stocks) from 20% to 25%.

Most provisions apply to tax years beginning after December 31, 2026, with some (like debt exclusion) starting for debt incurred after that date.

Significant Changes to Existing Law

• EITC: Boosts credit rates and amounts beyond current levels (e.g., current max for one child is about 34% up to $3,995; this raises it significantly) and extends inflation protection.
• CTC: Replaces the existing partially refundable credit (under old section 24) with a new fully refundable one (new section 36D), repeals temporary COVID-era credits, and updates references throughout the tax code.
• Medical Deduction: Eliminates the AGI floor, making more routine medical costs deductible without itemizing (previously, only expenses over 7.5% of AGI qualified for itemizers).
• New Deductions: Introduces several above-the-line deductions (sections 224–228), which benefit non-itemizers (about 90% of taxpayers who take the standard deduction). These were not previously available.
• Debt Forgiveness: Expands the exclusion to all individual debt discharges (previously limited to cases like insolvency or qualified real estate), removing coordination rules with other exclusions.
• Capital Gains: Increases the maximum rate for high earners, affecting the progressive tax structure.

Potential Impacts

• On Citizens: Low- and middle-income families, especially those with children, renters, or high commuting/education costs, could see significant tax savings or refunds (e.g., higher EITC/CTC might add thousands per family). Debtors benefit from non-taxable loan forgiveness. Higher capital gains taxes could reduce after-tax investment returns for wealthier individuals.
• On Government Agencies: The IRS will need to update forms, systems, and guidance (e.g., regulations for commuting/tutoring by 2027) to administer new rules, potentially increasing administrative workload. Treasury may face revenue losses from expanded credits/deductions (estimated in billions annually), partially offset by higher capital gains taxes.
• On International Relations: Minimal direct impact, though provisions for U.S. territories (e.g., payments to Puerto Rico/American Samoa) could affect federal-territorial fiscal ties.

Main Stakeholders Affected

• Families and Individuals: Parents (via EITC/CTC/daycare/tutoring), renters, commuters using public transit, those with medical/childcare costs, credit card users, and debtors seeking bankruptcy/settlement relief.
• Taxpayers by Income: Primarily benefits those under $150,000 AGI; higher earners face capital gains hike.
• Businesses and Investors: Minimal direct effects, but investors in stocks/real estate may pay more on gains; tutoring/childcare providers could see indirect demand growth.
• Government Entities: IRS (implementation/enforcement), Treasury (revenue/territorial payments), and U.S. territories (e.g., Puerto Rico residents eligible for CTC).

Notable Legal, Constitutional, or Political Implications

• Legal: Alters the Internal Revenue Code extensively, requiring IRS regulations for verification (e.g., commuting expenses) and anti-fraud measures (e.g., SSN requirements, prior claim bans). Could lead to litigation over deduction eligibility or phaseouts if ambiguities arise.
• Constitutional: No major challenges anticipated; changes fit Congress's taxing power under Article I, but broad debt exclusion might raise equal protection questions if seen as favoring certain debtors (though neutral on its face).
• Political: Shifts tax policy toward progressive relief for working-class needs (e.g., family/education support) while raising rates on investment income, potentially sparking debates on revenue neutrality, economic incentives, and equity between wage earners and investors. Repeal of temporary credits signals a return to permanent reforms.

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

Sponsor

Rep. Cherfilus-McCormick, Sheila [D-FL-20]

Cosponsors (4)

Rep. McIver, LaMonica [D-NJ-10], Rep. Johnson, Henry C. "Hank" [D-GA-4], Rep. Tlaib, Rashida [D-MI-12], Rep. Tokuda, Jill N. [D-HI-2]

Recent Actions

• 2025-04-17: Referred to the House Committee on Ways and Means.
• 2025-04-17: Introduced in House
• 2025-04-17: Introduced in House

Bill Versions

• All-Americans Tax Relief Act of 2025 — issued 2025-04-17 — PDF (26 pages)