Bill Expands EITC for More Workers, Allows Using Prior Year's Income Starting 2026

The Tax Cut for Workers Act of 2025 significantly expands the Earned Income Tax Credit (EITC) for individuals without qualifying children, effective for tax years beginning after December 31, 2025. Key changes include lowering the minimum eligibility age, removing the maximum age limit, doubling the credit percentage, increasing income thresholds, and allowing taxpayers to optionally use their previous year's earnings to calculate the credit.

Wider Net: Who Qualifies Now?

This bill opens the EITC door for more people. Under Section 2, the minimum age to claim the credit drops from 25 to 19 for most workers. There are special considerations: students must still be 24, but qualified former foster youth or homeless youth can qualify at 18. Crucially, the bill eliminates the upper age limit (previously 64), meaning workers 65 and older can now qualify. Think of a 20-year-old working their first full-time job or a 67-year-old working part-time to supplement retirement – both could potentially receive this credit for the first time. Section 3 also makes permanent the EITC rules established for U.S. possessions like Puerto Rico and American Samoa, ensuring continued access for residents there.

Bigger Credit, More Flexibility

It's not just about who qualifies, but how much they might get. Section 2 doubles the credit and phaseout percentage rate from 7.65% to 15.3% for eligible workers without children. It also significantly boosts the income levels where the credit begins phasing out, raising the earned income amount from $4,220 to $9,820 and the phaseout threshold from $5,280 to $11,610 (these amounts will be adjusted for inflation after 2026). This means workers can earn more before their credit starts shrinking. Furthermore, Section 4 introduces a potentially helpful option: taxpayers can choose to use their prior year's earned income to calculate their EITC if it results in a larger credit. This could be a big deal for someone whose income fluctuates year-to-year, like a freelancer or someone who faced unemployment; they could use the higher income year to maximize their refund. The IRS will treat incorrect use of this prior-year income election as a mathematical error.

The Bottom Line: More Support for Workers

Starting with the 2026 tax year, these changes aim to put more money back into the pockets of low-to-moderate income workers without qualifying children. By expanding eligibility to include younger adults just starting out and older workers, increasing the credit's value, and offering flexibility for those with variable income, the bill seeks to bolster financial stability. While choosing whether to use prior-year income adds a step to tax filing, it offers a strategic option for potentially increasing a tax refund based on individual circumstances.