In a bid to support working families and lift the economic prospects of middle-class Americans, Vice President Kamala Harris has proposed a new tax initiative, the LIFT the Middle-Class Act. This proposal introduces a refundable tax credit that would provide up to $500 a month for qualifying individuals. Let’s break down what this means, the IRS requirements for eligibility, and how this plan could affect you.
What is the “LIFT the Middle-Class Act”?
The “LIFT the Middle-Class Act” is designed to provide direct financial assistance to low – and moderate – income individuals and families. The act focuses on offering a monthly refundable tax credit to those who meet certain income criteria.
According to the Tax Foundation, The “LIFT the Middle-Class Act” which was introduced way back in 2018 shortly before Harris expressed her interest in running for the 2020 Presidential Elections.
If passed, this tax credit would be available to households earning less than $100,000 annually. The credit could reach up to $500 per month, equating to $6,000 annually for a single filer, or $12,000 for a couple who file jointly.
A report from CNBC’s Jessica Dickler, mentions what Harris said at political event in West Allis, “Building up the middle class will be a defining goal of my presidency… When our middle class is strong, American is strong”.
Additionally, the credit is refundable, which means even if you do not owe taxes, you can still receive the full benefit, which would help put more money in your pocket each month.
Who is eligible for the $500 monthly credit?
Under the LIFT Act proposal, the IRS will establish specific eligibility requirements based on income thresholds and filing status. Here are the key requirements:
- Income limits:
For individuals, eligibility is based on gross income of less than $100,000 per year.
For married couples filing jointly, the income limit is $200,000.
- Tax filing status:
Single taxpayers and joint filers will be able to claim the credit, provided their income falls below the threshold.
- Refundable credit:
The tax credit is refundable, which means if you owe no taxes, you will still receive the credit in the form of a refund from the IRS.
- Income based on Tax Returns:
The IRS will determine eligibility based on your most recent tax return. If your income falls below the prescribed limits and you file your taxes, you could automatically qualify for this credit.
- No meed for additional applications:
If you already file your taxes with the IRS, you should not need to apply separately for this credit, although the IRS may require additional information in some cases.
How does the refundable credit work?
The key feature of the LIFT Act’s refundable credit is that it will not just reduce your tax bill but also provide money back if you owe little or no taxes. In essence, if your total tax liability is less than $500 a month, the IRS would issue a refund to make up the difference. Here’s how that would work:
- If you are eligible for the full $500 per month and your tax liability is zero, you will receive the full $500 as a refund each month.
- If your tax liability is less than $500, the IRS will issue a check to make up the difference. For example, if you owe $100 in taxes, you will still receive a $400 refund for that month.
This monthly refund structure aims to provide continuous support to individuals, ensuring that they are not waiting until tax season to receive assistance.
What are the IRS requirements for the LIFT act?
If the LIFT the Middle-Class Act passed into law, the IRS will need to make sure they can accurately distribute the $500 monthly payments. Here are the expected requirements:
- Filing your taxes:
Even though the credit is automatic for qualifying individuals, you still must file your taxes annually to ensure your eligibility is updated each year.
- Income verification:
The IRS will verify your income via your tax returns. As long as you are under the specified income limit for your filing status, you should qualify.
- Providing accurate information:
The IRS will use the information you provide on your tax returns to determine the amount of the monthly credit. If you fail to report income accurately, this could delay or disqualify you from receiving the credit.
- Maintaining your filing status:
If your income exceeds the threshold during a particular year, you may no longer qualify for the credit, so it is essential to file your taxes and update your information regularly.
How will this impact you?
Should this bill succeed, the refundable $500 tax credit can impact the life of countless Americans for the better. With more funds coming in every month, a large number of people would manage to meet their basic requirements such as food, transport, housing or health. For those families that already find it difficult to provide for their basic needs, such payment would provide the needed relief.
In addition, the monthly payments would give families confidence since it would level the incomes for households across the country. The monthly refundable payment would also be advantageous to those engaged in low paying jobs who in most cases have no stable working hours.
