The EITC Lookback Act allows low- and moderate-income workers to use their previous year's earnings to calculate the Earned Income Tax Credit (EITC) if their income drops in the current year. This gives workers flexibility when they experience a temporary income decline—such as from job loss, reduced hours, or seasonal work—by letting them claim a larger tax credit based on higher prior-year earnings rather than their reduced current income. The change is permanent and applies to tax years beginning after December 31, 2024, meaning workers can start using this option when filing their 2025 taxes. The bill does not include new federal spending, as it simply changes how the existing EITC is calculated. This primarily benefits working families and individuals earning below the EITC income thresholds who face year-to-year earnings volatility.
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