Download national and select state estimates
A new proposal in Congress to expand the Earned Income Tax Credit (EITC) would help families with the costs of raising children, which has increased nearly 28 percent over the past three years by one estimate. The Working Parents Tax Relief Act, recently introduced by Rep. McDonald Rivet, is one of the latest approaches to help working-class families deal with an ongoing affordability crisis.
Key Findings
- The bill would expand the EITC by increasing the maximum possible credit by $5,500 for up to 3 children under age 4.
- About 10 million adults and 8 million children across the nation would benefit from this change in 2026.
- The average tax cut for households affected by the bill would be nearly $4,500 a year.
- The bill is targeted to working-class families, with 70 percent of the benefit going to households in the bottom 40 percent of income earners and nearly all (97 percent) going to the bottom 60 percent.
The bill would only affect about 3 percent of households nationally, but it would be vastly more important for certain groups with children. For example, more than a fifth of the children living in the bottom 60 percent of households would benefit from the bill, as illustrated in the table above.
Results would be similar across the ten largest states, shown below. In McDonald Rivet’s home state of Michigan, for example, the average tax cut for families affected by the bill would be more than $4,700 next year.
How the Proposal Works
The EITC is a tax credit equal to a certain percentage of earnings up to a maximum amount. The credit percentage and the maximum earnings credited depend on how many children the taxpayer has. The proposal would increase the percentage of earnings credited for each child in the taxpayer’s home under age 4 so that the maximum possible credit would increase by $5,500 per child for up to 3 children under age 4.
For example, under current rules, the maximum EITC for a family with one child is $4,427. Under the proposal, if the child is under age 4, the maximum credit for a one-child family would more than double, increasing by $5,500 to $9,927.
Under current rules, the maximum EITC for a family with three or more children is $8,230. Under the proposal, if such a family has three children under age 4, its maximum EITC would increase by $5,500 for each of those children to $24,730. (In other words, the maximum EITC for a family with three or more young children would triple.)
The EITC is a refundable credit, meaning families can still receive it even if they owe very little or no federal income tax (though all families receiving it still pay Social Security and Medicare taxes). Because the credit is calculated as a percentage of earnings, at least one member of the household must be in the formal workforce.
The EITC is already one of the federal government’s largest antipoverty programs, lifting 4.4 million people above the poverty line in 2024. The Working Parents Tax Relief Act would expand the total EITC provided by the federal government by about 30 percent, and all that increase would go to families with young children.
