Family Affordability Tax Credit
For income tax years commencing on and after January 1, 2024, but before January 1, 2034, the bill creates a refundable family affordability tax credit (credit) as follows:
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For each of a taxpayer's eligible children 5 years of age or younger, a taxpayer filing a single return with adjusted gross income of $15,000 or less and taxpayers filing a joint return with adjusted gross income of $25,000 or less can claim a $3,200 credit; -
For each of a taxpayer's eligible children 5 years of age or younger, a taxpayer filing a single return with adjusted gross income between $15,000 and $85,000 and taxpayers filing a joint return with adjusted gross income between $25,000 and $95,000 can claim a credit, the amount of which is reduced by $220 from $3,200 for every $5,000 above $15,000 or $25,000 of adjusted gross income that the resident individual or individuals make; -
For each of a taxpayer's eligible children between the ages of 6 and 16, a taxpayer filing a single return with adjusted gross income of $15,000 or less and taxpayers filing a joint return with adjusted gross income of $25,000 or less can claim $2,400; and -
For each of a taxpayer's eligible children between the ages of 6 and 16, a taxpayer filing a single return with adjusted gross income between $15,000 and $85,000 and taxpayers filing a joint return with adjusted gross income between $25,000 and $95,000 can claim a credit, the amount of which is reduced by $165 from $2,400 for every $5,000 above $15,000 or $25,000 of adjusted gross income that the resident individual or individuals make. - A taxpayer who files a single return is allowed a credit for each of the taxpayer's eligible children who are 5 years of age or younger in the amount of $3200, as adjusted for inflation and as modified by later parts of the bill, and is allowed a credit for each of the taxpayer's eligible children who are 6 years of age or older but less than 17 years of age in an amount that is 75% of the amount allowed for children 5 years of age or younger as modified.
- Two taxpayers who file a joint return are allowed a credit for each of the taxpayers' eligible children who are 5 years of age or younger in the amount of $3200, as adjusted for inflation and as modified by later parts of the bill, and are allowed a credit for each of the taxpayers' eligible children who are 6 years of age or older but less than 17 years of age in an amount that is 75% of the amount allowed for children 5 years of age or younger as modified.
For income tax years commencing on and after January 1, 2025, but before January 1, 2026, if the compound annual growth of the state's revenue that is subject to the state fiscal year spending limit (nonexempt revenue) from the 2024-25 fiscal year to the 2025-2026 fiscal year is projected to be at a rate that is greater than or equal to 2%, then, for a taxpayer filing a single return, the bill reduces the $3200 amount of the credit by 6.875% for each $5000 above which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $3200 amount of the credit by 6.875% for each $5000 above which the taxpayers' adjusted gross income exceeds $25,000. If, for income tax years commencing on and after January 1, 2025, but before January 1, 2026, the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the 2025-2026 fiscal year is projected to be at a rate that is less than 2%, the credit is not allowed.
For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.75%, then, for a taxpayer filing a single return, the bill reduces the $3200 amount of the credit by 6.875% for each $5000 above which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $3200 amount of the credit by 6.875% for each $5000 above which the taxpayers' adjusted gross income exceeds $25,000.
For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.56% but less than 3.75%, then, for a taxpayer filing a single return, the bill reduces the $3200 amount of the credit by 9.06% for each $5000 above which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $3200 amount of the credit by 9.06% for two taxpayers filing a joint return for each $5000 above which the taxpayers' adjusted gross income exceeds $25,000.
For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.37% but less than 3.56%, then, for a taxpayer filing a single return, the bill reduces the $3200 amount of the credit by 13.59% for each $5000 above which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $3200 amount of the credit by 13.59% for each $5000 above which the taxpayers' adjusted gross income exceeds $25,000.
For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.18% but less than 3.37%, then the bill reduces the amount of the credit to $2600, adjusted for inflation, and, for a taxpayer filing a single return, reduces that amount by 19.23% for each $5000 above which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $2600 amount by 19.23% for each $5000 above which the taxpayers' adjusted gross income exceeds $25,000.
For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3% but less than 3.18%, then the bill reduces the amount of the credit to $1650, adjusted for inflation, and, for a taxpayer filing a single return, reduces that amount by 30.30% for each $5000 above which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $1650 amount by 30.30% for each $5000 above which the taxpayers' adjusted gross income exceeds $25,000.
For income tax years commencing on or after January 1, 2025, the department of revenue is required to adjust the federal adjusted gross income amounts set forth in the bill to reflect inflation for each income tax year in which the credit is allowed if cumulative inflation since the last adjustment, when applied to the current limits, results in an increase of at least one thousand dollars when the adjusted limits are rounded to the nearest one thousand dollars.
For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is less than 3%, the credit is not allowed.
The bill also provides that the full amount of the credit can only be claimed for an income tax year in which there are projected to be excess state revenues for the fiscal year that ends during the income tax year that are required to be refunded pursuant to section 20 (7)(d) of article X of the state constitution in an amount that will equal or exceed the amount required to be refunded pursuant to the homestead property tax exemption plus the projected full amount of the credit. For an income tax year in which there are projected to be excess state revenues for the fiscal year that ends during the income tax year that will exceed the amount required to be refunded pursuant to the homestead property tax exemption but will not exceed that amount plus the projected aggregate amount of the credit that may be claimed in that income tax year, the credit will be allowed but will be reduced proportionally so that the aggregate amount of the credit available is equal to the amount of excess state revenues remaining to be refunded. For an income tax year in which there is not projected to be excess state revenues for the fiscal year that ends during the income tax year or the amount of such excess state revenues required to be refunded will be less than the amount required to be refunded pursuant to the homestead property tax exemption, the credit is not allowed for that income tax year. The department of revenue is authorized and encouraged to develop a means of paying the credit in 12 equal monthly payments rather than annually.
(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)
(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)