The "Lower Your Taxes Act" expands the earned income tax credit, establishes a refundable monthly child tax credit, adjusts capital gains rates for high-income earners, and increases certain corporate tax rates, with the goal of prioritizing deficit and debt reduction.
Emilia Sykes
Representative
OH-13
The "Lower Your Taxes Act" aims to modify several aspects of the tax code, including expanding the earned income tax credit, treating state non-refundable earned income tax credits as refundable, and establishing a refundable child tax credit with monthly advance payments. Additionally, the bill adjusts capital gains rates for high-income taxpayers and increases certain corporate tax rates. The bill states that any extra money made from this law should first go towards lowering the national deficit and then towards lowering the national debt. These changes are primarily effective for taxable years beginning after December 31, 2025.
Lower Your Taxes Act: EITC & Child Tax Credit Boost, Corporate Taxes Up, No Capital Gains Rate for Millionaires
The "Lower Your Taxes Act" makes big changes to the tax code, aiming to give low- and middle-income families a boost while also tackling the national debt. Here's the breakdown:
Tax Credit Turn-Up
This bill significantly expands the Earned Income Tax Credit (EITC) starting in 2026. It bumps up the credit percentage (to 68%, 80%, and 90% in some cases) and raises the income limits for eligibility (up to $19,000, $27,000, and $15,000, depending on the situation). It also lowers the minimum age to qualify to 18 (SEC. 3). Think of it like this: if you're a single parent working full-time at a low-wage job, you could see a much larger tax refund, potentially thousands of dollars more, come tax time. The bill also makes it easier for people in states with non-refundable earned income tax credits to get a federal payment matching the state credit they would have gotten if it were refundable (SEC. 4). So, if your state has a non-refundable EITC, you might get an extra check from the feds, on top of your state benefits.
Monthly Money for Families
Starting in 2026, the bill introduces a monthly Child Tax Credit (CTC) of $300 per child 6 and older, and $350 for kids under 6 (SEC. 5). This replaces the old annual Child Tax Credit. This money will be sent out monthly, via direct deposit, acting like a regular income boost for families. The amount phases out for higher earners, starting to decrease above $150,000 for couples and $112,500 for single parents. There's also a $500 credit for other dependents. The catch? If your income changes significantly during the year, or if there's a mistake, you might have to pay some of that money back. The IRS will set up an online portal to help manage this, but it's something to be aware of. For instance, if you get a big raise mid-year, you'll want to update your info to avoid a surprise tax bill later. The bill also sets up ways for the IRS to handle situations where, for example, divorced parents might both try to claim the same kid (SEC. 5).
Big Bucks, Big Changes
To help pay for these changes and reduce the deficit (SEC. 2), the bill makes some major shifts on the higher end of the income scale. Starting in 2026, if you make over $1 million, you won't get the lower capital gains tax rate on your investments (SEC. 6). That means profits from selling stocks or other assets will be taxed at the same rate as your regular income. The bill also raises the corporate tax rate from 21% to 28%, and increases the tax on corporate stock buybacks from 1% to 4% (SEC. 7). Plus, there's a change to the corporate alternative minimum tax - it'll be 15% of adjusted income up to $5 billion, and 25% on anything over that. These changes could bring in more revenue, but some companies might not be thrilled about it, and it could potentially affect investments and the overall economy. The Treasury will be required to notify potentially eligible tax payers of the earned income tax credit starting in 2025 (SEC 3).