The “Childless” EITC: Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2)

The “Childless” EITC: Temporary Expansion for 2021 Under the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2)

INSIGHTi
The “Childless” EITC: Temporary Expansion
for 2021 Under the American Rescue Plan Act
of 2021 (ARPA; P.L. 117-2)
Updated May 3, 2021
The earned income tax credit (EITC) is the largest need-tested antipoverty program that provides cash to
families. Workers with qualifying children—that is, dependent children who live with the taxpayer for
more than half the year—receive the majority of EITC benefits. For 2018, 26.5 mil ion taxpayers received
a total of $64.9 bil ion from the EITC. Of that total, there were 6.9 mil ion recipients without qualifying
children (about 26% of the total) who received $2.1 bil ion (about 3% of the total dollars), receiving an
average credit of $302.
This Insight provides an overview of the EITC for workers without qualifying children at home, often
cal ed the “childless” EITC. The term “childless,” however, may be misleading. Workers without
qualifying children may have noncustodial children, live with children for less than six months of a year,
or live with nonbiological children they cannot claim for the credit. This Insight then summarizes the
temporary expansion of the “childless” EITC for 2021 that was included in the American Rescue Plan Act
of 2021 (ARPA; P.L. 117-2). The Biden Administration has proposed making the ARPA expansion of the
“childless” EITC permanent.
What is the EITC?
The EITC is a refundable tax credit available to low-income workers. Like al tax credits, the EITC can
reduce income tax liability. Since the EITC is a refundable tax credit, if a taxpayer’s EITC is greater than
what they owe in income taxes, they can receive the difference (the portion of the credit that remains after
offsetting any income tax liability, often referred to as the “refundable portion” of the credit) as a tax
refund. This means that low-income taxpayers, who often have little to no income tax liability, can receive
the full amount of the credit. The EITC is received once a year as a lump-sum payment when households
file their federal income tax returns.
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Calculating the EITC
A taxpayer’s EITC is based on a formula that considers earned income, number of qualifying children,
marital status, and adjusted gross income (AGI). Under this formula, the EITC increases in value as
earned income increases up to a certain level. The EITC then remains at its maximum level over a
subsequent range of earned income, before gradual y decreasing in value over higher levels of income.
Although the general formula for al EITC recipients is the same, the specific values of EITC parameters
in the formula vary by the number of qualifying children (and marital status), resulting in multiple benefit
schedules il ustrated below.

Prior to ARPA, for 2021 the “childless” EITC gradual y phased in at a rate of 7.65% as earned income
increased until earned income reached $7,100. The credit then remained at its maximum level of $543
until income equaled $8,880 if unmarried or $14,820 if married. As income exceeded these levels, the
credit gradual y declined in value at a rate of 7.65% for every dollar of income over these levels, until the
credit equaled zero when income was $15,980 or greater (or $21,920 or greater, if married).
Prior to ARPA, for 2021 “childless” EITC recipients also had to be at least 25 years old and not older than
64 to be eligible for the credit.
Temporary Expansion of the “Childless” EITC for 2021 Under ARPA
The “childless” EITC formula was not original y part of the EITC when it was first enacted in the mid-
1970s. The EITC was expanded to include taxpayers without qualifying children in 1993 as part of the
Omnibus Budget Reconciliation Act of 1993 (OBRA93, P.L. 103-66) to partly offset a gasoline tax
increase included in the law. The “childless” EITC parameters have not been statutorily modified since
OBRA93 (they are annual y adjusted for inflation).

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There were proposals in recent years to increase the amount of the “childless” EITC. In the 116th
Congress, several bil s—including the Economic Mobility Act (H.R. 3300), the Working Families Tax
Relief Act (S. 1138/H.R. 3157), and the Cost-of-Living Refund Act (H.R. 3157)—would have increased
the amount of the credit by adjusting the credit formula and changing the age limits for “childless” EITC
recipients, general y expanding eligibility to younger and older individuals. The Obama Administration
also proposed expanding the “childless” EITC.
In the 117th Congress, the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) temporarily expanded
the “childless” EITC for 2021.
For 20201, the legislation temporarily increases the rate at which the credit phases in, from 7.65% to
15.3%; nearly triples the maximum amount of the credit from $543 to $1,502; increases the income level
at which the credit begins to phase out from $8,880 to $11,610 (and from $14,820 to $17,550 if married);
and increases the rate at which the credit phases out from 7.65% to 15.3%.

ARPA also temporarily (for 2021 only) reduces the minimum age of eligibility from 25 to 19 for most
workers. For students who are attending school at least part-time, the age limit is temporarily reduced
from 25 to 24. For former foster children and youth who are homeless, the minimum age is temporarily
reduced from 25 to 18. The bil temporarily eliminates the upper age limit, so workers aged 65 and older
are eligible in 2021.
The budgetary cost of this one-year expansion is estimated to be $11.9 bil ion (al occurring in FY2021
and FY2022).

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Impact of Expanding the “Childless” EITC
Research has found that the EITC increases participation in the labor force, particularly among single
mothers, and reduces poverty. But its impacts are general y restricted to families with children. An
expanded EITC for workers without qualifying children might similarly encourage work and reduce
poverty among these individuals. However, others point out that a significant share of the “childless”
population may already have higher labor force participation rates than single mothers, so a “childless”
EITC expansion may have a more modest effect on labor force participation. An ongoing demonstration
of an expanded “childless” EITC has found a mix of modestly positive and insignificant effects on
employment and household income. In light of the continued impact of the COVID-19 pandemic on low-
wage workers, a larger “childless” EITC may also provide income support to some vulnerable workers,
including older and younger workers who are currently ineligible because of the age limits.

Author Information

Margot L. Crandall-Hollick

Acting Section Research Manager

Disclaimer
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