Trump's 'big beautiful' spending bill could make it harder to claim this low-income tax credit

CNBC

10-06-2025

As Senate Republicans debate President Donald Trump's "big beautiful bill", a lesser-known provision from the House-approved package could make it harder to claim a low-income tax credit.
If enacted as written, the House measure in the "One Big Beautiful Bill Act" would require precertification of each qualifying child for filers claiming the so-called earned income tax credit, or EITC, starting in 2028.
Under current law, taxpayers claim the EITC on their tax return — including Schedule EIC for qualifying children.
The provision aims to "avoid duplicative and other erroneous claims," according to the bill's text. But policy experts say the new rules would burden eligible filers, who may forgo the EITC as a result. The measure could also delay tax refunds for those filers, particularly amid IRS cutbacks, experts say.
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"You're going to flood the IRS with all these [EITC] documents," said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center. "It's just not clear how they're going to process all this information."
Holtzblatt, who has pushed to simplify the EITC for decades, wrote a critique of the proposed precertification last week.
"This is not a new idea, but was previously considered, studied and rejected for very good reasons," Greg Leiserson, a senior fellow at the Tax Law Center at New York University Law, wrote about the proposal in late May.
Studies during the George W. Bush administration found an EITC precertification process reduced EITC claims for eligible filers, Leiserson wrote. During the study, precertification also yielded a lower return on investment compared to existing EITC enforcement, such as audits, he wrote.
One of the key benefits of the EITC is the tax break is "refundable," meaning you can still claim the credit and get a refund with zero taxes owed.
That's valuable for lower earners who don't have a tax bill, experts say.
To qualify, you need "earned income," or wages from work. The income phase-outs depend on your "qualifying children," based on four IRS tests.
"Eligibility is complicated," and residency requirements for qualifying children often cause errors, said Holtzblatt with the Tax Policy Center.
For 2025, the tax break is worth up to $8,046 for eligible families. You can claim the maximum EITC with adjusted gross income up to $61,555 for single filers and $68,675 for married couples filing jointly. These phase-outs apply to families with three or more children.
As of December 2024, about 23 million workers received the EITC for tax year 2022, according to the IRS. But 1 in 5 eligible taxpayers don't claim the tax break, the agency estimates.
Nine Democratic Senators last week voiced concerns about the House-approved EITC changes in a letter to Senate Majority Leader John Thune, R-S.D., and House Speaker Mike Johnson, R-La.
If enacted, the updates would "further complicate the EITC's existing challenges and make it more difficult to claim," the lawmakers wrote.
Higher earners are more likely to face an audit, but EITC claimants have a 5.5 times higher audit rate than the rest of U.S. filers, partly due to improper payments, according to the Bipartisan Policy Center.
The proposed EITC change, among other House provisions, still need Senate approval, and it's unclear how the measure could change.
However, under the reconciliation process, Senate Republicans only need a simple majority to advance the bill.