The Earned Income Tax Credit (EITC) has been a powerful, income-boosting tool for low-income working parents. The Working Parents Tax Relief Act (WPTRA), introduced by Rep. Kristen McDonald Rivet (D-MI), would increase the maximum EITC by up to $5,500 per child under 4 years old. 

The bill would channel additional EITC benefits to about 6 million low-income families with young children. This is a period in a child’s life when benefits can have the greatest impact. TPC estimates the WPTRA would cost a little more than $300 billion over the 10-year budget window (FY2026-FY2035).

About 1 out of every 4 families with children in the bottom 20 percent of the income distribution would see their EITC increase by an average of almost $6,000 (Figure 1). (This is more than the $5,500 bonus because some families who would receive the bonus have more than one eligible child.)

Benefits from the EITC under the WTPRA would be highly concentrated among the lowest-income families: Almost 90 percent of the new benefits would go to the families in the bottom 40 percent of the income distribution. The remaining 10 percent would go to families with children in the middle of the income distribution. For families with children under 4 that would receive a higher EITC under WPTRA, it would be fully phased out at higher income levels than under current law. 

What would the Working Parents Tax Relief Act do?

WPTRA would increase the maximum EITC by up to $5,500 per child under 4 years old. Under the bill, the EITC would continue to be fully phased in at the same income level as under current law, but it would phase in faster to reach the increased benefit. 

That means that for families for whom the EITC would be larger than current law, each dollar of earnings would generate more credit than under current law (Figure 2).

For the small share of families with at least 3 children under age 4, each additional dollar of earnings would increase the family’s tax credit by about $1.35 until the family reaches the maximum credit. 

WPTRA’s benefits could be better targeted

Under WPTRA, a married couple with two young children would be eligible to receive some credit until their income reached roughly $90,000; $83,000 if single. If the WPTRA EITC were phased out faster, benefits would be more concentrated on families with low- and moderate-incomes. 

For example, if the larger credit phased down by 35 cents for each additional dollar of income, a married couple with two young children would stop qualifying for the EITC once their income reached about $84,000. A single parent with two young children would stop qualifying at about $76,000. That chance would reduce the bill’s cost by about $70 billion over 10 years.

WPTRA would allow families of young children to receive the new credit as a monthly payment

Most families receive the EITC as part of their annual tax refund. That would likely be true of the expanded credit as well. The bill would give families the option to receive the boost as a monthly payment after a tax return had been filed. Some families may prefer this timing to better match the need to pay for ongoing needs such as diapers and child care. 

Delivering the credit after a tax return has been filed would protect families from needing to repay advanced benefits, a risk of past monthly credits. (When a credit is delivered before a tax return is filed, families for whom income drops or a child they claimed moves to another home, may be eligible for less credit than received in advance.) 

But it would also delay a family's access to the additional amount of the credit provided under the bill.  It is unclear how popular this option would be, especially as families struggle now. 

Congress could choose instead to advance the bonus for young children, just as the CTC was in 2021 using data from prior tax years. 

Another option Congress could explore to better match timing of benefit receipt to need, which was once considered for the CTC, would be to allow all families with young children to be eligible for half the new EITC boost ($2,750 per child) without working. If a family’s income dropped, their credit would not fall below $2,750, making advancing the credit less risky. 

Under this policy approach, the average credit increase would be $6,200 among families in the bottom 20 percent of income who claim the EITC. Because some families with very low incomes would be eligible for a larger credit under this option, it would cost about $10 billion more than the WPTRA EITC. 

Policymakers who aim to support working families have choices

The CTC has received more attention in recent years as an income support for families with children than the EITC. Proposals including the American Family Act, the Family First Act, and the Stronger Start for Working Families Act would expand the CTC. Because benefits from the EITC phase out at much lower incomes than those from the CTC, modifications to the EITC can provide a substantial income boost to working families at more modest cost than if these changes were applied to a more broadly available credit, like the CTC. 

The EITC remains an important option that provides more targeted benefits than the child tax credit (CTC), another tool used to support families with children. Increasing the EITC for families with young children would reinforce the EITC’s ability to support working families with low and moderate income, benefiting many families that were excluded from the recent CTC expansion in the One Big Beautiful Bill Act.

Efforts to bolster the EITC, especially for families with younger children, could provide much-needed support at a critical stage of family life.