According to The Sun, Thousands of dollars in direct payments could soon be on their way to eligible Americans, thanks to the “inflation adjustment” rule recently announced by the Internal Revenue Service (IRS).
Inflation Adjustments for the 2025 Tax Year
On Tuesday, the IRS confirmed adjustments that will affect residents when they file their returns in early 2026. These changes are designed to account for inflation and are set to impact various tax credits, including the Earned Income Tax Credit (EITC).
Understanding the Earned Income Tax Credit (EITC)
The EITC is a refundable credit aimed at assisting low to moderate-income individuals and families, particularly those with children. To qualify for the EITC for the 2023 tax returns, filers must meet several essential criteria.
Crucial Criteria for EITC Eligibility
For the latest tax year, there are six key requirements to qualify for the EITC:
- Earned Annual Income: No more than $63,398.
- Investment Income: Less than $11,000.
- Social Security Number: A valid SSN must be held by the filer by the deadline for 2023 returns.
- Citizenship Status: Filers must be U.S. citizens or resident aliens for the entire year.
- Foreign Earned Income: Filers must not have submitted a Foreign Earned Income form.
- Marital Status Rules: Specific criteria must be met for those who separated from their spouse.
Similar qualifications are expected to remain in place for the 2025 tax year, although income and investment income thresholds may slightly change.
Increased EITC Amounts for Eligible Filers
Those who meet all six criteria, along with having three or more qualifying dependents, could receive up to $8,046 in EITC due to the inflation adjustment. This is a notable increase from the previous amount of $7,830 for the 2024 tax year, marking a difference of $216.
Eligible Americans can expect to receive their $8,046 check or direct deposit around the time they file their returns for the 2025 tax year. Additionally, qualifying amounts for single filers and those with different numbers of dependents will also see increases.
Also read: Sam’s Club Faces Backlash Over Mandatory Memberships: Investigation Underway
Other Positive Changes from Inflation Adjustments
Several other categories have also experienced increases due to the inflation adjustment for the 2025 tax year, including:
- Alternative Minimum Tax Exemption Amounts
- Qualified Transportation Fringe Benefits
- Health Flexible Spending Cafeteria Plans
- Medical Savings Accounts
- Foreign Earned Income Exclusion
- Estate Tax Credits
- Annual Exclusion for Gifts
- Adoption Credits
However, personal exemptions, itemized deductions, and lifetime learning credits will remain unchanged.
Additional Resources
For further details on the updated amounts and other information, taxpayers can visit the IRS website. There are also at least six ways to file taxes for free. Additionally, some taxpayers may be eligible to claim a share of a $14.95 million pot from a “privacy” settlement.
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