Obama Budget Would Expand More Than Just the EITC for Childless Workers

By Lauren Pescatore

We’ve recently centered most of our coverage of the President’s budget for fiscal year 2015 on his major proposal to expand the federal Earned Income Tax Credit (EITC) for childless workers.  But a number of other proposals in the President’s budget would also benefit working family tax credits and the millions of families and individuals who depend on them. These proposals include:

  • Making permanent the expansion of the federal Child Tax Credit: The American Recovery and Reinvestment Tax Act of 2009 (ARRA) lowered the income threshold for the Child Tax Credit to $3,000, an improvement that was extended twice, most recently through 2017 in the American Taxpayer Relief Act of 2012. Without this provision, families would need to earn more than $13,000 to claim the credit. The President’s proposal would make this lower income threshold permanent, effective in 2018. 
  • Permanently extending EITC “marriage penalty” relief and increasing the credit for larger families: ARRA increased the income level at which the EITC begins to phase-out for married couples to $5,000 above the level for single filers, providing more of an incentive for married couples to file jointly. The act also increased benefits for larger families by creating a new category or “third tier” of the EITC for families with three or more children. In this tier, the credit phases in at 45 percent of income (up from 40 percent), effectively increasing the maximum credit for these families by almost $600. These provisions were extended twice as well, most recently through December 2017 in the American Taxpayer Relief Act of 2012. The President’s proposal would make both provisions permanent, effective in 2018.
  • Expanding the Child and Dependent Care Credit (CDCTC) for young children: The President’s proposal would allow filers to claim an additional CDCTC of up to $4,000 per child under age 5, for up to two children. The rate of the additional CDCTC would be 30 percent, and would phase down as income rises.
  • Extending  the EITC paid preparer requirements to the Child Tax Credit: The President is proposing to extend the due diligence requirements for paid tax preparers, the same preparers that many low-income families rely on for help claiming the EITC, to include the Child Tax Credit.
  • Simplifying the rules for claiming the EITC for workers without qualifying children: Under current law, if a taxpayer resides with a child that qualifies them for the EITC, but does not claim the child – often times because the child is claimed by another individual in the household – the taxpayer is not eligible for any form of the EITC. The President’s proposal would allow these taxpayers to claim the EITC for childless workers.

More information on the President’s proposals can be found in this Department of Treasury report.