New 2025 Tax Credit Offers 10% Refundable Relief, But Caps Income at $100K

The "Tax Relief from Tariffs and High Costs Act" is doing exactly what it says on the tin—at least for one year. Section 2 of this bill introduces a brand new, temporary, and refundable tax credit for individual taxpayers, specifically targeting the 2025 tax year. If you qualify, you get a credit equal to 10% of your total federal income tax liability for that year, which is a pretty significant chunk of change for many working households.

The 10% Discount on Your Tax Bill

Think of this as a 10% instant discount on your federal tax bill for 2025. The key here is that the credit is refundable, which is tax-speak for "if the credit is bigger than the taxes you owe, the government sends you the difference." This is great news for lower- and middle-income workers who might see their tax liability shrink significantly or even turn into a direct refund check, helping offset those rising costs mentioned in the bill’s title. The bill is clear that this credit (which they’re calling Section 36C) is calculated after you’ve already taken other specific credits, like the Child Tax Credit, meaning it stacks on top of some of the relief you might already be claiming.

The $100K Income Line in the Sand

There’s a major catch, and it’s all about income. This 10% credit is strictly limited by an income cap. If your Modified Adjusted Gross Income (MAGI)—which is essentially your income before certain deductions—is over $100,000 for the 2025 tax year, you won’t qualify for this credit at all. This provision ensures the relief is highly targeted toward middle-class and lower-income earners. For example, a single earner making $105,000 won't see a dime of this relief, while their neighbor making $95,000 will get the full benefit based on their tax liability. This makes the bill very clear about who the intended beneficiary is, and who is footing the bill through reduced federal revenue.

What This Means on the Ground

For a small business owner or a salaried employee making under the $100,000 threshold, this credit could translate into hundreds or even thousands of dollars back in their pocket when they file their 2025 taxes. If you’re a construction worker who owes $5,000 in federal income tax, this bill essentially wipes out $500 of that cost. Because this is a one-time, one-year deal, it’s a temporary boost, not a permanent change to the tax structure. The rest of the bill section involves technical housekeeping, making sure this new credit is correctly recognized across the entire tax code, which is necessary to ensure the IRS can actually process the refunds come 2026.