Overview
Title
To amend the Internal Revenue Code of 1986 to enhance the child tax credit, and for other purposes.
ELI5 AI
The "Family Security Act" is a plan to give more money back to families with kids and moms-to-be, but it takes away some money-saving options for people who file taxes in certain ways.
Summary AI
S. 5256, titled the "Family Security Act," aims to modify the Internal Revenue Code to make the child tax credit more beneficial by increasing the credit amounts and making them fully refundable, starting in 2026. The bill also introduces a credit for pregnant mothers, starting at a gestational age of 20 weeks, and simplifies the earned income tax credit for those with children. Additional amendments include removing certain tax benefits, like the head of household filing status, and imposing a cap on the state and local tax deduction for individuals.
Published
Keywords AI
Sources
Bill Statistics
Size
Language
Complexity
AnalysisAI
General Summary of the Bill
The proposed legislation, titled the "Family Security Act," aims to amend the Internal Revenue Code of 1986 to enhance child tax credits and introduce new tax credits for pregnant mothers, among other changes. The principal objective is to provide financial relief to families by increasing child-related tax benefits and simplifying certain aspects of the tax code. Additionally, it includes several amendments aimed at refining tax provisions, notably simplifying the earned income credit and introducing limitations on state and local tax deductions.
Summary of Significant Issues
The bill presents significant changes that have noteworthy implications. One major change is the enhancement and permanency of the child tax credit, which will be adjusted based on income levels. A new tax credit for pregnant mothers is also introduced, which requires physician certification and adjustment for inflation. The legislation further proposes the elimination of the head of household filing status and the additional exemption for dependents, which could considerably impact taxpayers relying on these provisions. Another crucial amendment concerns the limitation of deductions for state and local taxes, capped at $30,000 or $15,000.
Concerns have been raised about the complexity of calculations and tax code references, which might make compliance challenging for the general public. Additionally, the introduction of subjective criteria such as "reasonable medical judgment" for verifying pregnancy could result in inconsistent application across states.
Public Impact Analysis
For the broader public, the enhancements to the child tax credit could offer substantial relief to families, particularly those with lower incomes. By making the credits more accessible and increasing the monetary amounts, the bill could improve the financial stability of American households with children. However, making sense of the complex procedures and numerous tax code references might pose comprehension challenges, especially for individuals without a tax professional's assistance.
The limitation on state and local tax deductions may have mixed impacts. Residents of states with high local taxes might find this provision financially burdensome, potentially exacerbating disparities between states with different tax structures.
Impact on Specific Stakeholders
The bill likely benefits families with children by providing increased and more accessible tax credits. These changes can help alleviate the financial pressures associated with raising children, especially for economically marginalized families. Pregnant mothers might also benefit from the new tax credit, offering financial support during a crucial period.
Conversely, those who previously qualified as heads of household or used the additional exemption for dependents will find these benefits eliminated, which could present financial challenges for single parents and low-to-middle-income families. The cap on state and local tax deductions could negatively impact taxpayers in high-tax states, sparking concerns over regional financial inequities.
Overall, while the bill aims to offer broader tax relief and simplify certain tax processes, potential negative impacts on specific groups underscore the need for careful consideration and, potentially, supplemental legislative measures to address disparities effectively.
Financial Assessment
The "Family Security Act," designated as S. 5256, proposes significant modifications to the Internal Revenue Code, particularly focusing on enhancing the child tax credit and introducing a credit for pregnant mothers. These changes involve several financial references and have varying implications for taxpayers:
Child Tax Credit Expansion
The bill proposes a permanent expansion of the child tax credit, altering the Internal Revenue Code to increase the base credit amount. For each qualifying child under the age of 6, the credit amount would be $4,200, and for each child aged 6 to 17, the amount would be $3,000. This adjustment reflects a substantial increase from previous amounts, signaling a significant financial commitment to supporting families with children.
Critics may point out the complexity introduced by the detailed calculations tied to the taxpayer's modified adjusted gross income, especially those earning below $20,000, where the credit is adjusted according to a specific percentage formula. This complexity could lead to misunderstandings or compliance issues, particularly for taxpayers who struggle to navigate the intricate tax code without assistance.
Tax Credit for Pregnant Mothers
A new component in the bill is the establishment of a tax credit for pregnant mothers, amounting to $2,800 per qualifying unborn child. This credit applies once the unborn child reaches a gestational age of 20 weeks. The credit's application is contingent upon the taxpayer's modified adjusted gross income, with the applicable percentage of the credit being reduced for incomes exceeding $10,000.
The financial implications of this credit are significant, but the bill does not offer detailed monitoring mechanisms to prevent potential misuse. The reliance on "reasonable medical judgment" for determining eligibility could result in inconsistent applications across different states, making it a point of concern for the credit's equitable implementation.
Simplification of the Earned Income Credit
The bill also aims to simplify the earned income credit for taxpayers with children by setting a definitive cap on the credit amount. For those with no qualifying children filing individually, the cap is $700, while for joint filers it is $1,400. For those with one or more qualifying children, the cap is increased to $4,300 for individual filings and $5,000 for joint filings.
Impact from Eliminations and Limitations
The proposed elimination of the head of household filing status, as well as the additional exemption for dependents after 2025, signals a withdrawal of certain financial benefits that many taxpayers currently rely on. The lack of a detailed rationale or impact analysis for these eliminations raises concerns about potential financial burdens for single parents and other affected taxpayers.
Moreover, the bill places a $30,000 limit on the state and local tax deduction for individuals, which reduces the total deductible amount, potentially affecting taxpayers in high-tax jurisdictions. This cap represents a substantial financial constraint for these taxpayers, and without a robust explanation, there's a possibility of public discontent due to perceived inequity.
Conclusion
Overall, S. 5256 involves notable financial allocations and modifications that aim to support families but also introduces complexities and cap reductions that may have broader impacts. By addressing child tax credits and introducing a new credit for pregnant mothers, the bill reflects substantial financial support for families. However, it is crucial to carefully consider and address the potential issues related to fairness and application complexities to ensure the intended benefits reach the deserving taxpayers efficiently and equitably.
Issues
The elimination of the head of household filing status in Section 203 could disproportionately impact single parents or individuals who previously benefited from this status, potentially raising concerns about fairness and representation in the tax code. The bill does not provide a justification or analysis for this significant change, which may lead to public controversy.
Section 101's permanent expansion of the child tax credit raises concerns about the complexity of calculations and tax code references, which could be overly complex and difficult for general readers to understand, possibly leading to compliance issues or misunderstandings for taxpayers.
The elimination of the additional exemption for dependents after 2025 in Section 202 might financially impact taxpayers who currently rely on this exemption. The bill does not discuss the potential financial effects on affected individuals and families, leading to potential concerns about the bill's impact.
Section 205 limits the deduction for state and local taxes, setting a maximum limit of $30,000, which could have significant financial implications for taxpayers in high-tax jurisdictions. The absence of a rationale behind selecting these limits might raise questions about equity and adequacy for different taxpayers.
Section 102 introduces a tax credit for pregnant mothers but lacks clarity on the program's financial implications and monitoring mechanisms, potentially leading to unplanned expenditures or misuse. The bill's reliance on subjective 'reasonable medical judgment' could lead to inconsistent application across different states.
The definition and calculation of the 'applicable percentage' in Sections 101 and 36D for child and pregnant mothers' tax credits, respectively, might confuse taxpayers, especially those with modified adjusted gross incomes below specified thresholds, without providing clear guidance or examples.
Section 204's exclusion of children from credit for expenses for household and dependent care services might face criticism for changing age eligibility without providing clear justification, leaving the impact on taxpayers ambiguous and potentially altering family financial planning.
The bill in Sections 101 and 102 makes several amendments that are highly technical and involve numerous references to the Internal Revenue Code, potentially making it difficult for the general public to understand without expert consultation, which may cause compliance challenges.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the document establishes the short title of the legislation, which is called the "Family Security Act."
101. Permanent expansion of child tax credit Read Opens in new tab
Summary AI
The bill permanently expands the child tax credit, allowing taxpayers to claim a credit for each qualifying child under 18, with specific amounts for children under 6 and older. It adjusts the credit based on income, limits the number of children eligible for the credit, and requires social security numbers for both the taxpayer and children; the tax code is amended to treat this credit as fully refundable and aligned with advance monthly payments.
Money References
- “(2) BASE CREDIT AMOUNT.—For purposes of paragraph (1), the base credit amount shall be an amount equal to the sum of— “(A) for each qualifying child who has not attained age 6 as of the close of the calendar year in which the taxable year of the taxpayer begins, $4,200, and “(B) for each qualifying child of the taxpayer who is not described in subparagraph (A), $3,000. “(b) Applicable percentage and limitation based on adjusted gross income.
- — “(1) APPLICABLE PERCENTAGE.—For purposes of subsection (a), the applicable percentage shall be— “(A) in the case of a taxpayer whose modified adjusted gross income is equal to or greater than $20,000, 100 percent, or “(B) in the case of a taxpayer whose modified adjusted gross income is less than $20,000, an amount (expressed as a percentage) equal to the quotient of— “(i) the modified adjusted gross income of the taxpayer, divided by “(ii) $20,000. “
- (2) LIMITATION.—The amount of the credit allowable under subsection (a) shall be reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds— “(A) in the case of a joint return, $400,000, or “(B) in any other case, $200,000. “(3) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this subsection, the term ‘modified adjusted gross income’ means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.
- — “(A) IN GENERAL.—In the case of a taxable year beginning after 2026, each of the $20,000 amounts in paragraph (1) shall be increased by an amount equal to— “(i) $20,000, multiplied by “(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2025’ for ‘2016’ in subparagraph (A)(ii) thereof. “
- (B) ROUNDING.—If any increase under this paragraph is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
102. Tax credit for pregnant mothers Read Opens in new tab
Summary AI
The bill section introduces a tax credit for pregnant mothers, allowing eligible taxpayers to receive up to $2,800 for each unborn child that reaches at least 20 weeks of gestation. The credit varies based on the taxpayer's income, includes provisions for adjusting income thresholds for inflation, and allows for advance payments. Eligibility requires a physician's certification, and the credit does not apply if the unborn child dies from an induced abortion, barring specific life-saving exceptions.
Money References
- “(a) Allowance of credit.—In the case of an eligible taxpayer with a qualifying unborn child, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of $2,800.
- — “(1) IN GENERAL.—For purposes of subsection (a), the applicable percentage shall be— “(A) in the case of a taxpayer whose modified adjusted gross income is equal to or greater than $10,000, 100 percent, or “(B) in the case of a taxpayer whose modified adjusted gross income is less than $10,000, the amount (expressed as a percentage) equal to the quotient of— “(i) the modified adjusted gross income of the taxpayer, divided by “(ii) $10,000. “(2) LIMITATION.—The amount of the credit allowable under subsection (a) shall be reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds— “(A) in the case of a joint return, $400,000, or “(B) in any other case, $200,000.
- — “(A) IN GENERAL.—In the case of a taxable year beginning after 2026, each of the $10,000 amounts in paragraph (1) shall be increased by an amount equal to— “(i) $10,000, multiplied by “(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting ‘2025’ for ‘2016’ in subparagraph (A)(ii) thereof. “
- (B) ROUNDING.—If any increase under this paragraph is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
36D. Credit for pregnant mothers Read Opens in new tab
Summary AI
This section proposes a tax credit for eligible pregnant women with unborn children who are at least 20 weeks old, as verified by a physician. The credit amount depends on the pregnant mother's income, and certain conditions such as multiple pregnancies, interactions with other tax credits, and exceptions for treatment-related deaths or cases related to saving the mother's life are also included.
Money References
- (a) Allowance of credit.—In the case of an eligible taxpayer with a qualifying unborn child, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the applicable percentage of $2,800.
- — (1) IN GENERAL.—For purposes of subsection (a), the applicable percentage shall be— (A) in the case of a taxpayer whose modified adjusted gross income is equal to or greater than $10,000, 100 percent, or (B) in the case of a taxpayer whose modified adjusted gross income is less than $10,000, the amount (expressed as a percentage) equal to the quotient of— (i) the modified adjusted gross income of the taxpayer, divided by (ii) $10,000. (2) LIMITATION.—The amount of the credit allowable under subsection (a) shall be reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds— (A) in the case of a joint return, $400,000, or (B) in any other case, $200,000. (3) MODIFIED ADJUSTED GROSS INCOME.—For purposes of this subsection, the term “modified adjusted gross income” has the same meaning given such term in section 36C(b)(3).
- — (A) IN GENERAL.—In the case of a taxable year beginning after 2026, each of the $10,000 amounts in paragraph (1) shall be increased by an amount equal to— (i) $10,000, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “2025” for “2016” in subparagraph (A)(ii) thereof.
- (B) ROUNDING.—If any increase under this paragraph is not a multiple of $100, such increase shall be rounded to the next lowest multiple of $100.
7527B. Advance payment of credit for pregnant mothers Read Opens in new tab
Summary AI
The section outlines a program where qualified taxpayers, specifically those with an unborn child, can receive advance monthly payments starting when they elect to participate and ending when the child is due. These payments are based on estimated credits for the taxpayers' taxable year, with the option to continue after the child's birth to meet the total advance amount, and the Secretary of the Treasury will provide regulations to manage and align the program.
201. Simplification of earned income credit for taxpayers with children Read Opens in new tab
Summary AI
The section modifies the rules for the earned income tax credit for people with children, increasing the amounts they can receive and making adjustments to the percentages and income thresholds. It also states that these changes will start applying to tax years after December 31, 2025, except for some children known as exempted children, who will continue under the old rules.
Money References
- (a) Additional limitation.—Paragraph (2) of section 32(a) of the Internal Revenue Code of 1986 is amended to read as follows: “(2) LIMITATION.—The amount of the credit allowable to a taxpayer under paragraph (1) for any taxable year shall not exceed the lesser of— “(A) the excess (if any) of— “(i) the credit percentage of the earned income amount, over “(ii) the phaseout percentage of so much of the adjusted gross income (or, if greater, the earned income) of the taxpayer for the taxable year as exceeds the phaseout amount, or “(B) an amount equal to— “(i) in the case of any taxpayer with no qualifying children— “(I) who is not filing a joint return, $700, or “(II) who is filing a joint return, $1,400, or “(ii) in the case of any taxpayer with 1 or more qualifying children— “(I) who is not filing a joint return, $4,300, or “(II) who is filing a joint return, $5,000.”. (b) Credit percentage and phaseout percentage.—The table contained in paragraph (1) of section 32(b) of the Internal Revenue Code of 1986 is amended— (1) by striking “1 qualifying child” in the first row and inserting “1 or more qualifying children”, (2) by striking “15.98” in the first row and inserting “25”, (3) by striking the second and third rows, and (4) by striking “7.65” in the third column of the last row and inserting “10”. (c) Earned income and phaseout amounts.—The table contained in subparagraph (A) of section 32(b)(2) of the Internal Revenue Code of 1986 is amended— (1) by striking “1 qualifying child” in the first row and inserting “1 or more qualifying children”, (2) by striking “$6,330” in the first row and inserting “$12,647”, (3) by striking “$11,610” in the first row and inserting “$33,000”, (4) by striking the second row, (5) by striking “$4,220” in the last row and inserting “$9,150”, and (6) by striking “$5,280” in the last row and inserting “$10,000”.
- (d) Joint returns.—Subparagraph (B) of section 32(b)(2) of the Internal Revenue Code of 1986 is amended by striking “$5,000” and inserting “$10,000, and the earned income amount determined under subparagraph (A) shall be increased— “(i) by $2,059, in the case of a taxpayer with 1 or more qualifying children, and “(ii) by $9,151, in the case of a taxpayer with no qualifying children.”. (e) Inflation adjustment.—Paragraph (1) of section 32(j) of the Internal Revenue Code of 1986 is amended— (1) by striking “2015” and inserting “2026”, (2) by striking clauses (i) and (ii) of subparagraph (B) thereof and redesignating clause (iii) of such subparagraph as clause (ii), and (3) by inserting before clause (ii) of subparagraph (B) thereof, as so redesignated, the following new clause: “(i) in the case of amounts in subsection (b)(2), ‘calendar year 2025’ for ‘calendar year 2016’, and”. (f) Effective date.
202. Elimination of additional exemption for dependents Read Opens in new tab
Summary AI
The section explains that starting in 2026, people will no longer get an additional tax exemption for dependents. This change means that the exemption amount will be considered zero, but it won't affect whether a person qualifies for any other tax deductions.
203. Elimination of head of household filing status Read Opens in new tab
Summary AI
The section eliminates the head of household filing status from the Internal Revenue Code, making changes to various subsections by striking references to the status, and includes conforming amendments across other sections of the tax code, all effective starting with the 2026 tax year.
Money References
- — (1) Paragraph (2) of section 25B(b) of the Internal Revenue Code of 1986 is amended to read as follows: “(2) OTHER RETURNS.—In the case of any taxpayer not described in paragraph (1), the applicable percentage shall be determined under paragraph (1) except that such paragraph shall be applied by substituting for each dollar amount therein (as adjusted under paragraph (3)) a dollar amount equal to 50 percent of such dollar amount.”
- (2) Section 25E(b)(2) of such Code is amended— (A) in subparagraph (A), by adding “and” at the end, and (B) by striking subparagraphs (B) and (C) and inserting the following: “(B) in the case of a taxpayer not described in subparagraph (A), $75,000.”. (3) Section 30D(f)(10)(B) of such Code is amended— (A) in clause (i), by adding “and” at the end, and (B) by striking clauses (ii) and (iii) and inserting the following: “(ii) in the case of a taxpayer not described in clause (i), $150,000.”. (4) Section 36B(b)(3)(B)(ii)(I)(aa) of such Code is amended by striking “and heads of households”.
- (5) Section 63(c) of such Code is amended— (A) in paragraph (2)— (i) in subparagraph (A)(ii), by adding “or” at the end, (ii) by striking subparagraph (B), and (iii) by redesignating subparagraph (C) as subparagraph (B), (B) in paragraph (4), by striking “, (2)(C),” each place it appears, and (C) in paragraph (7)— (i) by striking subparagraph (A) and inserting the following: “(A) INCREASE IN STANDARD DEDUCTION.—Paragraph (2)(B) shall be applied by substituting ‘$12,000’ for ‘$3,000’.”, and (ii) in subparagraph (B)— (I) in clause (i), by striking “paragraphs (2)(B) and (2)(C)” and inserting “paragraph (2)(B)”, and (II) in clause (ii), by striking “$18,000 and $12,000 amounts” and inserting “$12,000 amount”. (6) Section 68(b) of such Code is amended— (A) in paragraph (1)— (i) by striking subparagraph (B), (ii) in subparagraph (C), by striking “or head of household”, and (iii) by redesignating subparagraphs (C) and (D) as subparagraphs (B) and (C), respectively, and (B) in paragraph (2), by striking “subparagraphs (A), (B), and (C)” and inserting “subparagraphs (A) and (B)”. (7) Section 904(b)(3)(E)(i)(I) of such Code is amended by striking “(b),”.
- “(B) OTHER RETURNS.—In the case of any taxpayer who is not filing a joint return and who is not a surviving spouse (as defined in section 2(a)), the applicable dollar amount and the phaseout range shall be ½ of the amounts applicable under subparagraph (A) (as so adjusted).”
- (10) Subsection (g) of section 6695 of such Code is amended to read as follows: “(g) Failure To be diligent in determining eligibility for certain tax benefits.—Any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the Secretary by regulations with respect to determining eligibility for, or the amount of, the credit allowable by section 24, 25A(a)(1), or 32, shall pay a penalty of $500 for each such failure.”.
204. Exclusion of children from credit for expenses for household and dependent care services necessary for gainful employment Read Opens in new tab
Summary AI
The proposed amendments to Section 21 of the Internal Revenue Code would change the rules about who can be considered a qualifying individual for child care expenses related to work. These changes, effective after December 31, 2025, specify that the individual must be at least 18 years old and require care due to physical or mental incapacity, impacting how expenses are counted for care provided outside a taxpayer's household.
205. Limitation on deduction for State and local taxes of individuals Read Opens in new tab
Summary AI
This section of the bill amends the tax code to limit the amount individuals can deduct for state and local taxes on their federal tax returns starting after 2025. It sets a maximum deduction of $30,000 for most filers, with exceptions for certain foreign and business-related taxes.
Money References
- — “(A) IN GENERAL.—In the case of an individual and a taxable year beginning after December 31, 2025— “(i) foreign real property taxes shall not be taken into account under subsection (a)(1), and “(ii) the aggregate amount of taxes taken into account under paragraphs (1), (2), and (3) of subsection (a) and paragraph (5) of this subsection for any taxable year shall not exceed $30,000 ($15,000 in the case of a married individual filing a separate return).