Code Section 32
| Code Section | Effective Date | Name of Act | Name of Provision | 10yr Revenue Estimate ($millions) |
|---|---|---|---|---|
| 32 | 12/31/2012 | The American Taxpayer Relief Act of 2012 | Extension of modification of the earned income tax credit | -16,446 |
| 1, 32, and 63 | 12/31/2010 | The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 | Marriage Penalty Relief and Earned Income Tax Credit Simplification | -26,872 |
| 32 | 12/31/2010 | The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 | Increase in the Earned Income Tax Credit | -6,786 |
| 32(g), 3507, and 6051(a) | 12/31/2010 | The Air Traffic Control Act | Elimination of Advance Refundability of Earned Income Tax Credit | 1,131 |
| 32 | 12/31/2008 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Increase in the earned income tax credit | -4,663 |
Extension of modification of the earned income tax credit
Explanation of Provision
The provision extends the EITC at a rate of 45 percent for three or more qualifying children for five years (through 2017).
The provision extends the higher phase-out thresholds for married couples filing joint returns for five years (through 2017).
Marriage Penalty Relief and Earned Income Tax Credit Simplification
Explanation of Provision
Basic standard deduction
The provision increases the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return for two years (through 2012).
Fifteen percent rate bracket
The provision increases the size of the 15-percent regular income tax rate bracket for a married couple filing a joint return to twice the 15-percent regular income tax rate bracket for an unmarried individual filing a single return for two years (through 2012).
Earned income tax credit
The provision extends certain EITC provisions adopted by EGTRRA for two years (through 2012). These include: (1) a simplified definition of earned income; (2) a simplified relationship test; (3) use of AGI instead of modified AGI; (4) a simplified tiebreaking rule; (5) additional math error authority for the Internal Revenue Service; (6) a repeal of the prior-law provision that reduced an individual’s EITC by the amount of his alternative minimum tax liability; and (7) increases in the beginning and ending points of the credit phase-out for married taxpayers by $5,000.1530
Increase in the Earned Income Tax Credit
Explanation of Provision
The provision extends the EITC at a rate of 45 percent for three or more qualifying children for two years (through 2012). The provision extends the higher phase-out thresholds for married couples filing joint returns enacted as part of ARRA for two years (through 2012).
Elimination of Advance Refundability of Earned Income Tax Credit
Explanation of Provision
The provision repeals the advance payment option for the EITC. The taxpayer may still receive the nonrefundable portion of the EITC through the taxpayer’s paycheck, by adjusting withholding, to the extent the taxpayer otherwise has positive tax liability.
Increase in the earned income tax credit
Explanation of Provision
Three or more qualifying children
The provision increases the EITC credit percentage for families with three or more qualifying children to 45 percent for 2009 and 2010. For example, in 2009 taxpayers with three or more qualifying children may claim a credit of 45 percent of earnings up to $12,570, resulting in a maximum credit of $5,656.50.
Provide additional marriage penalty relief through higher threshold phase-out amounts for married couples filing joint returns
The provision increases the threshold phase-out amounts for married couples filing joint returns to $5,000 46 above the threshold phase-out amounts for singles, surviving spouses, and heads of households) for 2009 and 2010. For example, in 2009 the maximum credit of $3,043 for one qualifying child is available for those with earnings between $8,950 and $16,420 ($21,420 if married filing jointly). The credit begins to phase down at a rate of 15.98 percent of earnings above $16,420 ($21,420 if married filing jointly). The credit phases down to $0 at $35,463 of earnings ($40,463 if married filing jointly).
1530- The $5,000 amount, which is indexed for inflation annually, also reflects the increase from $3,000 to $5,000 described more fully in Title I, section K of this document, below.
-Return to Explanation of Provision