Simplification of earned income credit for taxpayers with children

(a) Additional limitation Section 32(a)(2) 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 section 32(b)(1) 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 section 32(b)(2)(A) 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 Section 32(b)(2)(B) 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 Section 32(j)(1) 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 (1) In general Subject to paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2025. (2) Nonapplication to exempted children (A) In general Subject to subparagraph (B), in the case of any eligible individual (as defined in section 32(c)(1) of the Internal Revenue Code of 1986) who has any qualifying children for the taxable year who are exempted children, section 32 of the Internal Revenue Code of 1986 shall be applied with respect to such eligible individual as if the amendments made by subsections (a) through (e) of this section had not been enacted. (B) Separate application In the case of any eligible individual (as so defined) who has— (i) any qualifying children for the taxable year who are not exempted children, and (ii) any qualifying children for such taxable year who are exempted children, section 32 of the Internal Revenue Code of 1986 shall be applied separately with respect to the children described in clause (i) and (pursuant to the rules described in subparagraph (A)) the children described in clause (ii). (C) Exempted child For purposes of this paragraph, the term exempted child means an individual who is described in subparagraph (A)(ii) or (B) of section 152(c)(3).