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Child and Dependent Care Tax Benefits: How They Work and Who Receives Them [October 26, 2017]
"Two tax provisions subsidize the child and dependent care expenses of working parents: the child and dependent care tax credit (CDCTC) and the exclusion for employer-sponsored child and dependent care. The child and dependent care tax credit is a nonrefundable tax credit that reduces a taxpayer's federal income tax liability based on child and dependent care expenses incurred. The policy objective is to assist taxpayers who work or who are looking for work. A taxpayer must meet a variety of eligibility criteria including incurring qualifying child and dependent care expenses for a qualifying individual and have earned income."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2017-10-26
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Impact of the Federal Income Tax on Poverty: Before and After the 2017 Tax Revision ('TCJA'; P.L. 115-97) [October 17, 2019]
From the Introduction: "This report is structured to first provide a brief overview of the major federal income tax provisions that affect lower-income individuals and families, including a comparison of how these provisions changed under the TCJA [Tax Cuts and Jobs Act]. The report then provides an analysis of how the pre-TCJA federal income tax affected poverty, followed by a comparison of how the post-TCJA federal income tax affected poverty. The report concludes with some observations on the benefits and limitations of the federal income tax system and refundable tax credits in reducing poverty."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.; Falk, Gene; Carter, Jameson A.
2019-10-17
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Coronavirus Aid, Relief, and Economic Security (CARES) Act--Tax Relief for Individuals and Businesses [Updated March 24, 2020]
From the Document: "Congress is considering a number of proposals that seek to mitigate the economic effects of the COVID-19 pandemic. One such proposal, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (S. 3548), was introduced in the Senate on March 19, 2020. On March 22, 2020, the Senate released an updated version of the CARES Act. A cloture vote on the motion to proceed on the amended version was rejected on March 22. Tax relief for individuals and businesses in the CARES Act includes [1] a one-time rebate to taxpayers; [2] modification of the tax treatment of certain retirement fund withdrawals and charitable contributions; [3] a delay of employer payroll taxes and taxes paid by certain corporations; and [4] a variety of changes to the tax treatment of business income and net operating losses."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Crandall-Hollick, Margot L.; Driessen, Grant A. . . .
2020-03-24
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COVID-19 and Stimulus Payments to Individuals: Considerations on Using Advanced Refundable Credits as Economic Stimulus [March 17, 2020]
From the Document: "In response to concerns about an economic slowdown stemming from the COVID-19 pandemic, policymakers have been considering a broad array of policy options. Some are targeted directly toward the individuals and industries that may be most affected. Others would more broadly seek to stimulate the economy. Among this latter category of policies, some have suggested a payroll tax cut, while others have proposed direct cash payments--'recovery rebates'--to virtually all households. One mechanism to provide cash payments relatively quickly is to create a new refundable tax credit and then advance it to households before they would otherwise claim it on their income tax returns. A similar policy was enacted most recently in 2008. This Insight addresses some common questions about advanced refundable tax credits."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2020-03-17
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Child and Dependent Care Tax Credit (CDCTC): Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) [April 7, 2021]
From the Document: "The child and dependent care tax credit (CDCTC) can help to partially offset working families' child care expenses. The American Rescue Plan Act (P.L. 117-2; ARPA) provided a temporary expansion of the CDCTC for 2021. This Insight summarizes the temporary change, highlighting the credit amount for 2021 before and after the temporary expansion. Beyond the CDCTC, working families may also be eligible to receive tax-free employer-sponsored child care benefits, often in the form of a flexible spending arrangement/account (FSA). ARPA increased the maximum amount of tax-free child care benefits employers could provide from $5,000 to $10,500 for 2021 [hyperlink]. This change is not discussed further in this Insight."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-04-07
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Child Tax Credit: Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) [Updated May 3, 2021]
From the Document: "In recent years, there has been increased interest [hyperlink] in providing direct benefits to families with children to reduce child poverty in the United States, sometimes in the form of tax benefits. The National Academy of Sciences (NAS) [hyperlink] included a 'child allowance' as part of a package of policies to reduce child poverty [hyperlink] over 10 years. (Senator Romney [hyperlink] has also proposed a child allowance.) Some research [hyperlink] has suggested that increasing the amount of the child tax credit that low-income families receive would substantially reduce child poverty[hyperlink], boost future earnings, and potentially improve future health and education outcomes [hyperlink]. In the 116th Congress, there were several legislative proposals [hyperlink] to expand the child tax credit, especially for lower-income families that tend to receive little or no benefit from the current credit. In the 117th Congress, a temporary one-year expansion of the child credit (for 2021) was included in the American Rescue Plan Act of 2021 (ARPA; P.L. [Public Law] 117-2). The Biden Administration has proposed [hyperlink] making the full refundability provision included in the ARPA expansion of the child credit permanent, while extending other ARPA provisions through the end of 2025. This Insight provides a summary of the child tax credit prior to ARPA and an overview of the temporary child credit expansion under ARPA for 2021."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-05-03
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'Childless' EITC: Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) [Updated May 3, 2021]
From the Document: "The earned income tax credit (EITC) is the largest need-tested antipoverty program that provides cash to families. Workers with 'qualifying children'--that is, dependent children who live with the taxpayer for more than half the year--receive the majority of EITC benefits. For 2018 [hyperlink], 26.5 million taxpayers received a total of $64.9 billion from the EITC. Of that total, there were 6.9 million recipients without qualifying children (about 26% of the total) who received $2.1 billion (about 3% of the total dollars), receiving an average credit of $302. This Insight provides an overview of the EITC for workers without qualifying children at home, often called the 'childless' EITC."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-05-03
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Child and Dependent Care Tax Credit (CDCTC): Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) [Updated May 3, 2021]
From the Document: "The child and dependent care tax credit (CDCTC) can help to partially offset working families' child care expenses. The American Rescue Plan Act (P.L. 117-2; ARPA) provided a temporary expansion of the CDCTC for 2021. This Insight summarizes the temporary change, highlighting the credit amount for 2021 before and after the temporary expansion. The Biden Administration has proposed [hyperlink] making the ARPA expansion of the CDCTC permanent."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-05-03
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What Share of Taxpayers Would See a Tax Increase or a Tax Decrease Under a Senate Version of the Tax Reform Bill? [December 15, 2017]
"An analysis of the Senate Finance Committee-approved tax reform bill by the Joint Committee on Taxation (JCT) indicates that the legislation would result in some taxpayers paying more in taxes, some paying less in taxes, and some seeing little or no change in their tax liability. JCT's analysis, dated November 27, 2017, was conducted before the Senate passed H.R. 1 with an amendment on December 2, 2017."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2017-12-15
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COVID-19 and Direct Payments to Individuals: Comparison of the Second Round of 'Stimulus Checks' in P.L. 116-260 to the First Round in the CARES Act (P.L. 116-136) [January 13, 2021]
From the Document: "At the end of 2020, lawmakers included a second round of direct payments in the Consolidated Appropriations Act, 2021 (P.L. 116-260). The payments equal $600 per eligible individual ($1,200 for most married couples) plus an additional $600 per eligible child, phasing down for higher-income households. The first round of direct payments was enacted in the CARES [Coronavirus Aid, Relief, and Economic Security] Act (P.L. 116-136) in March 2020. As with the first round of direct payments, the second round of payments are structured as a new one-time refundable credit against 2020 income taxes. Generally, these payments are being automatically issued by the Treasury based on 2019 tax data until January 15, 2021. Eligible households who do not automatically receive a second payment (or who receive less than they would based on their 2020 income and family size) are to generally be able to receive the payment (or receive an additional payment) as a refundable credit when they file their 2020 income tax return. These payments are not taxable and do not count as income or resources for a 12-month period in determining eligibility for, or the amount of assistance provided by, any federally funded public benefit program."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-01-13
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COVID-19 and Direct Payments to Individuals: Frequently Asked Questions (FAQs) About the Second Round of 'Stimulus Checks' in P.L. 116-260 [January 13, 2021]
From the Document: "In response to the continued economic weakness from the COVID-19 [coronavirus disease 2019] pandemic, Congress passed a second round of direct payments as part of the Consolidated Appropriations Act, 2021 (P.L. 116-260). The first round of direct payments were included in the CARES [Coronavirus Aid, Relief, and Economic Security] Act (P.L. 116-136). This Insight provides a brief overview of the second round of payments--often referred to as 'stimulus checks.'"
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-01-13
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COVID-19 and Direct Payments to Individuals: Comparison of the Second Round of 'Stimulus Checks' in P.L. 116-260 to the First Round in the CARES Act (P.L. 116-136) [Updated January 22, 2021]
From the Document: "At the end of 2020, lawmakers included a second round of direct payments in the Consolidated Appropriations Act, 2021 (P.L. 116-260). The payments equal $600 per eligible individual ($1,200 for most married couples) plus an additional $600 per eligible child, phasing down for higher-income households. The first round of direct payments was enacted in the CARES [Coronavirus Aid, Relief, and Economic Security] Act (P.L. 116-136) in March 2020. As with the first round of direct payments, the second round of payments are structured as a new one-time refundable credit against 2020 income taxes. Generally, these payments are being automatically issued by the Treasury based on 2019 tax data until January 15, 2021. Eligible households who do not automatically receive a second payment (or who receive less than they would based on their 2020 income and family size) are to generally be able to receive the payment (or receive an additional payment) as a refundable credit when they file their 2020 income tax return. These payments are not taxable and do not count as income or resources for a 12-month period in determining eligibility for, or the amount of assistance provided by, any federally funded public benefit program."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-01-22
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COVID-19 and Direct Payments to Individuals: Frequently Asked Questions (FAQs) About the Second Round of 'Stimulus Checks' in P.L. 116-260 [Updated January 22, 2021]
From the Document: "In response to the continued economic weakness from the COVID-19 [coronavirus disease 2019] pandemic, Congress passed a second round of direct payments as part of the Consolidated Appropriations Act, 2021 (P.L. 116-260). The first round of direct payments were included in the CARES [Coronavirus Aid, Relief, and Economic Security] Act (P.L. 116-136). This Insight provides a brief overview of the second round of payments--often referred to as 'stimulus checks.'"
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-01-22
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COVID-19 and Direct Payments: Summary of the CASH Act (H.R. 9051, 116th Congress) Modifications to 'Stimulus Checks' [January 22, 2021]
From the Document: "At the end of the 116th Congress, the House passed the Caring for Americans with Supplemental Help (CASH) Act (H.R. 9051). The CASH Act would have expanded the second round of stimulus checks enacted as part of the Consolidated Appropriations Act, 2021 (P.L. 116-260) and modified the first round of checks enacted in the CARES [Coronavirus Aid, Relief, and Economic Security] Act (P.L. 116-136) for certain households with older children and adult dependents. The Biden Administration has proposed increasing already enacted stimulus checks in a similar fashion as proposed in the CASH Act. This Insight summarizes how the CASH Act would have expanded and modified already enacted stimulus checks."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2021-01-22
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Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act: Division B--Revenue Provisions [May 15, 2020]
From the Document: "Congress continues to consider proposals intended to alleviate the economic effects associated with the Coronavirus Disease 2019, or COVID-19, pandemic. One such proposal, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), was introduced in the House on May 12, 2020. Division B of the HEROES Act, or the COVID-19 Tax Relief Act of 2020, contains a number of individual and business tax provisions, including [1] a one-time direct payment for eligible individuals, and an expansion of eligibility for the direct payments provided in the CARES [Coronavirus Aid, Relief, and Economic Security] Act; [2] enhanced benefits and/or expanded eligibility for the earned income tax credit (EITC), child tax credit, and child and dependent care tax credit, and suspension of the limitation on the deduction for state and local taxes paid; [3] expansions of tax credits for paid sick leave and paid family leave; [4] tax credits for employers and employees in businesses susceptible to COVID-19- related interruptions; [5] expanded utilization options for certain employee health and dependent care benefits; and [6] a permanent limitation on using noncorporate business losses to offset nonbusiness income, and reduced ability to carry back recent net operating losses."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.; Sherlock, Molly F.; Driessen, Grant A. . . .
2020-05-15
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Noncitizens and Eligibility for the 2020 Recovery Rebates [May 1, 2020]
From the Document: "Some policymakers have expressed concern that certain individuals, including some immigrants (referred to as noncitizens, foreign nationals, or aliens in law and throughout this Insight), are ineligible for direct payments under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136). The statute refers to these payments as 2020 recovery rebates. The Internal Revenue Service (IRS) refers to these payments issued in 2020 as Economic Impact Payments. [...] There are three main categories of individuals who are ineligible for these payments (not necessarily mutually exclusive): 1. children over 16 years old and adult dependents; 2. certain noncitizens who have individual taxpayer identification numbers (ITINs) or are nonresident aliens; and 3. higher-income taxpayers (generally with income over $99,000 if single, $198,000 if married, with higher thresholds for those with qualifying children). Generally, receipt of these payments in 2020 will be based on individuals' eligibility using information from 2019 (or, if unavailable, 2018). This Insight provides an overview of one category of individuals who are ineligible for the 2020 recovery rebates--certain noncitizens who have ITINs or are nonresident aliens."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.; Kolker, Abigail F.
2020-05-01
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Coronavirus Aid, Relief, and Economic Security (CARES) Act--Tax Relief for Individuals and Businesses [Updated April 28, 2020]
From the Document: "Congress has considered a number of proposals that seek to mitigate the economic effects of the Coronavirus disease 2019, or COVID-19, pandemic. One such proposal, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), was signed into law on March 27, 2020. Tax relief for individuals and businesses in the CARES Act includes: [1] a one-time rebate to taxpayers; [2] modification of the tax treatment of certain retirement fund withdrawals and charitable contributions; [3] a delay of employer payroll taxes and taxes paid by certain corporations; and [4] other changes to the tax treatment of business income and net operating losses. [...] This report briefly summarizes the major individual and business tax provisions of the CARES Act, as enacted."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Crandall-Hollick, Margot L.; Driessen, Grant A. . . .
2020-04-28
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How Would the HEROES Act (H.R. 6800) Modify the Direct Payments Enacted in the CARES Act (P.L. 116-136)? [May 19, 2020]
From the Document: "The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136), signed into law on March 27, 2020, included direct payments to individuals--referred to in the law as '2020 recovery rebates.' The Internal Revenue Service (IRS) refers to the payments issued in 2020 as economic impact payments (EIPs), whereas some media reports call them 'stimulus payments.' The recovery rebates are tax credits administered by the IRS. [...] The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), as passed by the House on May 15, 2020, would modify the direct payments provided in the CARES Act. Additionally, the HEROES Act would create a second round of direct payments. This Insight summarizes the proposed modifications, first describing the current-law treatment and then summarizing the HEROES Act changes."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2020-05-19
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Older Children, Adult Dependents, and Eligibility for the 2020 Recovery Rebates [April 23, 2020]
From the Document: "Some policymakers have expressed concern that certain individuals including older children and adult dependents are not eligible for direct payments enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136). The statute refers to these payments as 2020 recovery rebates. The Internal Revenue Service (IRS) refers to these payments issued in 2020 as economic impact payments. Receiving a recovery rebate in 2020 will not affect a taxpayer's 2020 income tax liability or tax refund, and taxpayers will generally not need to repay the rebate. There are three main categories of individuals ineligible for these payments (these categories may not be mutually exclusive): 1. children over 16 years old and adult dependents; 2. certain noncitizens without Social Security numbers (SSNs) or who are nonresident aliens; 3. higher-income taxpayers. This Insight provides an overview of one category of individuals who are ineligible for the 2020 recovery rebates--older children and adult dependents. This information may help inform any potential legislative debate considering another round of direct payments."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2020-04-23
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Impact of the Federal Income Tax Code on Poverty [Updated October 19, 2020]
From the Summary: "The federal individual income tax is structured so that the poor owe little or no income tax. In addition, the federal individual income tax (hereinafter referred to simply as the 'income tax code' or 'income tax') increases the disposable income of many poor families via refundable tax credits--primarily the earned income tax credit (EITC) and the refundable portion of the child tax credit, referred to as the 'additional child tax credit' (ACTC). These credits are explicitly designed to benefit low-income families with workers and children and can significantly boost families' disposable income, lifting many of these families above the poverty line."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.; Falk, Gene; Carter, Jameson A.
2020-10-19
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Heroes Act: Revenue Provisions [Updated October 26, 2020]
From the Document: "Congress continues to consider proposals intended to alleviate the economic effects associated with the Coronavirus Disease 2019, or COVID-19, pandemic. One such proposal, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800), was introduced in the House on May 12, 2020, and passed by the House on May 15, 2020. To date, the Senate has not considered H.R. 6800. A revised version of The Heroes Act (H.R. 8406) was introduced on September 29, 2020. The House adopted the revised version of the Heroes Act on October 1, 2020, as a House amendment to the Senate amendment to H.R. 925. [...] Consideration of The Heroes Act follows enactment of other laws addressing the COVID-19 crisis. Those laws are (1) the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (P.L. 116-123); (2) the Families First Coronavirus Response Act (FFCRA; P.L. 116-127); (3) the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136); and (4) the Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139)."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Gravelle, Jane; Crandall-Hollick, Margot L. . . .
2020-10-26
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Overview of Tax Provisions Expiring in 2012 [April 17, 2012]
"A number of tax provisions either expired in 2011 or are scheduled to expire at the end of this 2012. These include the following: [1] The Bush tax cuts, which reduced income taxes by reducing tax rates, reducing the marriage penalty, repealing limitations on personal exemptions and itemized deductions (PEP and Pease, respectively), expanding refundable credits, and modifying education tax incentives. The Bush tax cuts also reduced estate tax liabilities by increasing the amount of an estate exempt from taxation and by lowering the tax rate. [2] The alternative minimum tax (AMT) patch, which, by increasing the amount of income that is exempt from the AMT and allowing certain personal credits against the AMT, prevents an estimated 26 million additional taxpayers from owing the AMT. [3] The payroll tax cut, which reduced an employee's share of Social Security taxes by two percentage points. [4] A variety of previously extended temporary tax provisions, commonly referred to as 'tax extenders,' which affect individuals, businesses, charitable giving, energy, community development, and disaster relief. As Congress decides whether to extend these provisions, it may consider the estimated revenue losses associated with their extension. The Congressional Budget Office (CBO) estimated that extending these provisions through 2022, except for the payroll tax cut, which CBO assumes expires as scheduled at the end of 2012, would reduce revenues by $5.4 trillion between 2013 and 2022. Specifically, over this 10-year budgetary window extending the Bush tax cuts and extending the AMT patch would reduce revenues by $4.6 trillion, while extending the tax extenders would reduce revenues by $839 billion. The cost of extending the payroll tax cut for one year (2012) was estimated to be $114 billion over the 2012-2022 budgetary window."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2012-04-17
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Overview of Tax Provisions Expiring in 2012 [September 24, 2012]
"A number of tax provisions have either expired at the end of 2011 or are scheduled to expire at the end of this year. These include the Bush tax cuts, the alternative minimum tax (AMT) patch, the temporary payroll tax cut, and other temporary expiring provisions, many of which are commonly referred to as 'tax extenders.' Aside from the payroll tax cut, […] the most recent law extending many of these provisions was the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (P.L. 111-312). This report provides an overview of these expiring provisions. For each provision (or group of provisions), this report first describes the provision ('current law'), followed by a brief overview of legislation related to the provision, then outlines its past cost and if available the cost of its extension ('budgetary cost'), and concludes with a brief discussion of the current debate concerning the policy ('policy debate')."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2012-09-24
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Overview of the Tax Provisions in the American Taxpayer Relief Act of 2012 [February 4, 2013]
"On December 31, 2012, a variety of temporary tax provisions which were part of the 'fiscal cliff' expired. Two days later, the American Taxpayer Relief Act of 2012 (ATRA; P.L. [Public Law] 112-240) retroactively extended, and in certain cases modified, many of these provisions. The short time period between the expiration of these provisions and the enactment on January 2 of ATRA retroactively meant that from the perspective of all but upper-income taxpayers, income taxes remained unchanged between 2012 and 2013 (i.e., the amount of income tax withheld from their paycheck and the availability of certain tax deductions, credits, and exclusions remained unchanged). This report provides an overview of the tax provisions (Titles I-IV and Title X of P.L. 112-240) included in the 'fiscal cliff deal,' including 1. the permanent extension and modification of the 2001 and 2003 tax cuts, often referred to collectively as the 'Bush-era tax cuts'; 2. the temporary extension of certain tax provisions originally included as part of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5), often referred to as the '2009 tax cuts'; 3. the permanent extension of the alternative minimum tax (AMT) patch; 4. the temporary extension of a variety of other temporary expiring provisions for individuals, businesses, and energy often referred to as 'tax extenders'; and 5. the expansion of in-plan conversions of traditional employer-sponsored retirement accounts (like 401(k) plans) to employer-sponsored Roth accounts (like Roth 401(k) plans)."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2013-02-04
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Potential Federal Tax Implications of 'United States v. Windsor' (Striking Section 3 of the Defense of Marriage Act (DOMA)): Selected Issues [July 18, 2013]
"This report will provide an overview of the potential federal tax implications for same-sex married couples of the U.S. Supreme Court (SCOTUS) ruling in 'United States v. Windsor', with a focus on the federal income tax. Estate tax issues are also discussed. Importantly, this report focuses on changes in the 'interpretation and administration' of federal tax law that may result from the SCOTUS decision. This decision did not amend federal tax law. This report is not intended to address 'all' tax-related issues that may arise as a result of the 'Windsor' decision. Such discussion is beyond the scope of this report."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.; Sherlock, Molly F.; Pettit, Carol A.
2013-07-18
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Child Tax Credit: Current Law and Legislative History [July 17, 2014]
"This report provides an overview of the child tax credit under current law, as well as a legislative history of this tax benefit, which helps explain its purpose and current structure. When calculating the total amount of federal income taxes owed, eligible taxpayers can reduce their federal income tax liability by the amount of the child tax credit. Currently, eligible families that claim the child tax credit can subtract up to $1,000 per qualifying child from their federal income tax liability. The maximum amount of credit a family can receive is equal to the number of qualifying children in a family times $1,000. If a family's tax liability is less than the value of their child tax credit, they may be eligible for a refundable credit calculated using the earned income formula. Under this formula, a family is eligible for a refund equal to 15% of their earnings in excess of $3,000, up to the maximum amount of the credit. (This $3,000 amount is referred to as the 'refundability threshold'.) The credit phases out for single parents with income over $75,000 and married couples with income over $110,000."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2014-07-17
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American Opportunity Tax Credit: Overview, Analysis, and Policy Options [July 28, 2014]
"The American Opportunity Tax Credit (AOTC)--enacted on a temporary basis by the American Recovery and Reinvestment Act (ARRA; P.L. 111-5) and extended through the end of 2017 by the American Taxpayer Relief Act of 2012 (P.L. 112-240; ATRA)--is a partially refundable tax credit that provides financial assistance to taxpayers who are attending college, or whose children are attending college. The credit, worth up to $2,500 per student, can be claimed for a student's qualifying expenses incurred during the first four years of post-secondary education. In addition, 40% of the credit (up to $1,000) can be received as a refund by taxpayers with little or no tax liability. The credit phases out for taxpayers with income between $80,000 and $90,000 ($160,000 and $180,000 for married couples filing jointly) and is hence unavailable to taxpayers with income above $90,000 ($180,000 for married couples filing jointly). There are a variety of other eligibility requirements associated with the AOTC, including the type of degree the student is pursuing, the number of courses the student is taking, and the type of expenses which qualify. Prior to the enactment of the AOTC, there were two permanent education tax credits, the Hope Credit and the Lifetime Learning Credit. The AOTC has temporarily replaced the Hope Credit from 2009 through the end of 2017 (the Lifetime Learning Credit remains unchanged). A comparison of these two credits indicates that the AOTC is both larger--on a per capita and aggregate basis--and more widely available in comparison to the Hope Credit. Data from the Internal Revenue Service (IRS) indicate that enactment of the AOTC contributed to a more than tripling of both the aggregate value of education credits claimed by taxpayers and the number of taxpayers claiming these credits."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2014-07-28
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Child Tax Credit: Current Law and Legislative History [July 28, 2014]
"This report provides an overview of the child tax credit under current law, as well as a legislative history of this tax benefit, which helps explain its purpose and current structure. When calculating the total amount of federal income taxes owed, eligible taxpayers can reduce their federal income tax liability by the amount of the child tax credit. Currently, eligible families that claim the child tax credit can subtract up to $1,000 per qualifying child from their federal income tax liability. The maximum amount of credit a family can receive is equal to the number of qualifying children in a family times $1,000. If a family's tax liability is less than the value of their child tax credit, they may be eligible for a refundable credit calculated using the earned income formula. Under this formula, a family is eligible for a refund equal to 15% of their earnings in excess of $3,000, up to the maximum amount of the credit. (This $3,000 amount is referred to as the 'refundability threshold.') The credit phases out for single parents with income over $75,000 and married couples with income over $110,000. The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 (P.L. 105-34) to help ease the financial burden that families incur when they have children. Like other tax credits, the child tax credit reduces tax liability dollar for dollar of the value of the credit. Initially the child tax credit was a nonrefundable credit for most families. A nonrefundable tax credit can only reduce a taxpayer's tax liability to zero, while a refundable tax credit can exceed a taxpayer's tax liability, providing a cash payment to low-income taxpayers who owe little or no tax."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2014-07-28
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American Opportunity Tax Credit: Overview, Analysis, and Policy Options [July 10, 2014]
From the introduction: "The American Opportunity Tax Credit (AOTC) is a temporary tax provision that provides financial assistance to taxpayers whose children (or who themselves) are attending college. The AOTC is scheduled to expire at the end of 2017, at which point Congress may allow the provision to expire, extend the provision in its current form, or extend a modified version of the AOTC. In light of increased congressional interest in reforming the tax code, policy makers may choose to consider modifying the AOTC in conjunction with other education tax benefits. The Joint Committee on Taxation (JCT) estimated that all education tax benefits for individuals cost $46.7 billion in 2014. Higher education tax credits, of which the AOTC is the largest, accounted for $24.5 billion (52%) of the total. This report provides both an in-depth description of this tax credit and an analysis of its economic impact. This report is organized to first provide an overview of the AOTC, followed by a legislative history that highlights the evolution of education tax credits from proposals in the 1960s through the recent extension of the AOTC at the end of 2012. This report then analyzes the credit by looking at who claims the credit, the effect education tax credits have on increasing college attendance, and administrative issues with the AOTC. Finally, this report concludes with a brief overview of various policy options, including tax law changes proposed in Chairman Camp's tax reform bill and in the President's FY2015 budget request."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.
2014-07-10
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Earned Income Tax Credit (EITC): An Overview [December 3, 2014]
"The Earned Income Tax Credit (EITC) is a refundable tax credit available to eligible workers with relatively low earnings. Because the credit is refundable, an EITC recipient need not owe taxes to receive the benefit. The credit is authorized by Section 32 of the Internal Revenue Code (IRC) and administered as part of the federal income tax system. In 2012, a total of $64.1 billion was claimed by 27.8 million tax filers, making the EITC the largest need-tested anti-poverty cash assistance program. Under current law, the EITC is calculated based on a recipient's earned income, using one of eight different formulas, which vary depending on several factors, including the number of qualifying children a tax filer has (zero, one, two, or three or more) and his or her marital status (unmarried or married). All else being equal, the amount of the credit tends to increase with the number of eligible children the EITC claimant has. Indeed, most of the benefits of the EITC--97% of EITC dollars in 2012--go to families with children. This report provides an overview of the EITC, first discussing eligibility requirements for the credit, followed by how the credit is computed and paid. The report then provides data on the growth of the EITC since it was first enacted in 1975. Finally the report concludes with data on the EITC claimed on 2012 tax returns, examining EITC claims by number of qualifying children, income level, tax filing status, and location of residence."
Library of Congress. Congressional Research Service
Falk, Gene; Crandall-Hollick, Margot L.
2014-12-03
