The Keep Your Pay Act modifies the federal tax code to provide greater financial support and flexibility for working families and taxpayers with dependents, effective for tax years beginning after December 31, 2025. The bill allows workers experiencing income fluctuations to calculate the Earned Income Credit based on prior-year earnings if that produces a larger credit, and it establishes two new monthly tax credits: a child tax credit providing $300 per child age 6 and older (and $360 for younger children, with higher amounts for newborns) and a $500 credit for other qualifying dependents, both with income-based phase-outs. Monthly advance payments will be made automatically to eligible taxpayers based on recent tax returns or information provided to the IRS, with automatic eligibility for newborns and individuals receiving certain government benefits, and the amounts will adjust annually for inflation beginning in 2027. The bill includes strong protections for these payments, shielding them from garnishment and creditor claims, and requires the IRS to provide taxpayers with detailed notifications about their advance payments and any changes to payment amounts. The legislation also extends these tax credit provisions to U.S. territories including Puerto Rico and American Samoa, with the Treasury Secretary authorized to issue regulations addressing various filing situations and circumstances.
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