HR6900119th CongressWALLET

American Affordability Act of 2025

Sponsored By: Representative Thompson (CA)

Introduced

Summary

This bill would be a broad tax-credit overhaul that rewrites incentives across housing, families, and clean energy. It would create monthly child payments, reshape housing tax programs, and add new investment credits for recycling, transmission, and batteries.

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  • Families, children, and caregivers: It would create a monthly Child Tax Credit of $300 for children 6 and older and $360 for those under 6, with a portal and presumptive eligibility rules. It would also raise the Child and Dependent Care Tax Credit rates to 50% and increase qualifying expense limits to $8,000 single and $16,000 per family.
  • Renters, homebuyers, and developers: It would change Low‑Income Housing Tax Credit rules, repeal the qualified contract option for most buildings, and create new housing incentives including an Affordable Housing Conversion Credit with program caps described that include $12.0 billion and a separate $3.0 billion AHCC designation program.
  • Clean energy, transport, and industry: It would extend many clean energy and clean vehicle credits and add new investment credits that are generally 30%. It would authorize a $3.0 billion advanced battery credit allocation and create credits for water reuse, recycling, and transmission line projects.

Bill Overview

Analyzed Economic Effects

34 provisions identified: 27 benefits, 0 costs, 7 mixed.

Temporary health premium rules 2026–28

If enacted, the bill would create temporary Premium Tax Credit rules for taxable years 2026–2028 that can expand refundable credit eligibility for low-income taxpayers. The bill would also treat small employer HRAs as not affordable for those years, which can raise advance or refundable credit amounts for some workers.

Credit for converting buildings

If enacted, developers who convert nonresidential buildings (at least 20 years old) into affordable housing could get a tax credit equal to 20% of qualifying conversion costs when the building is placed in service. The conversion must meet a spending test (exceeding the greater of 50% of adjusted basis or $100,000) and reserve at least 20% of units for households at or below 80% AMI for 30 years. Credits would be allocated by housing agencies and are subject to a $12 billion national cap.

First‑time homebuyer refundable credit

If enacted, first‑time homebuyers who buy a principal residence after enactment would be able to claim a refundable credit equal to 10% of the purchase price up to $15,000 (or $7,500 if married filing separately). You must be age 18+, financed with a federally backed mortgage, meet first‑time buyer rules, and attach the settlement statement. A four‑year recapture rule applies if you stop living in the home during the recapture period.

Tax credit for home hazard fixes

If enacted, homeowners and some renters would be able to claim a tax credit equal to 30% of qualifying disaster‑mitigation expenditures for dwelling units paid or incurred after enactment. If a State reimburses part of the cost, your credit is reduced proportionally. The credit reduces the property's tax basis and applies to enumerated hardening work and approved standards.

More money for college credits

If enacted, the American Opportunity Tax Credit would be usable for up to 6 taxable years instead of 4 and would be fully refundable for the taxable year 2026. The bill would also expand qualifying expenses to include certain computers, course materials (up to $1,000), and child care needed to attend school, and remove felony drug‑conviction denials for post‑2025 years.

New tax breaks for workers

If enacted, the bill would restore and modify an above‑the‑line deduction for performing artists with an income phaseout and create an above‑the‑line deduction for employee union dues and expenses when tied to your job. It would also define which overtime pay can qualify for a special deduction under section 225, clarifying FLSA overtime and some pre‑work agreements.

Automatic gratuities count as tips

If enacted, amounts charged as mandatory or uniform automatic gratuities at restaurants, hospitality, or cosmetology businesses would count as qualified tips for tax reporting and deduction rules for tax years after December 31, 2025. This includes pooled tip-sharing arrangements consistent with state or local law.

Big family tax changes

If enacted, the bill would (1) require Treasury rules to clarify coordination of child tax credits and monthly payments in complex cases, (2) make the adoption tax credit refundable and add a standard affidavit and transitional carryforward treatment, (3) raise the Child and Dependent Care Credit caps to $8,000 (one child) and $16,000 (two+), and (4) raise the employer dependent‑care exclusion to $10,000 ($5,000 MFS) for calendar years after December 31, 2025. The CDCTC top rate would be 50% and would phase down by income with inflation indexing.

Changes to clean vehicle credits

If enacted, the bill would change timing and percentage rules for the new clean vehicle credit and move the acquisition cutoff for previously owned clean vehicle credits to after December 31, 2032. It would create stepped credit percentages for vehicles placed in service in certain years and extend the window for used clean vehicle buyers to claim the credit.

Changes to Earned Income Tax Credit

If enacted, the bill would change EITC age rules so more young adults can qualify: general minimum age 19, students generally must be 24, and former foster or homeless youth can qualify at 18. The bill would also index several EITC dollar amounts for inflation and extend EITC applicability to Puerto Rico and some other U.S. possessions beyond 2025.

Electric bicycle tax credit

If enacted, you would get a nonrefundable tax credit equal to 30% of the cost of a qualified electric bicycle placed in service after enactment. The credit is capped at $5,000 per bike (and limited to 1 per filer or 2 per joint return, reduced for bikes claimed in prior years) and phases down by $100 per $1,000 your modified AGI exceeds the stated thresholds. Taxpayers could transfer the credit to registered retailers or receive advance payments through participating retailers.

Higher Earned Income Tax Credit

If enacted, the bill would raise numeric parameters in the EITC tables, increase the rate for workers without qualifying children from 7.65% to 15.3%, and allow an election to use prior‑year earned income if current earned income is lower. These changes would apply for tax years beginning after December 31, 2025.

Higher home‑sale gain exclusion

If enacted, for sales after December 31, 2025 the tax exclusion for gain on a principal residence would rise to $500,000 for single filers and $1,000,000 for joint filers. Beginning in taxable years after 2026 those amounts would be adjusted for inflation using 2025 as the base year and rounded down to the nearest $100.

New $500 other dependent credit

If enacted, the bill would create a $500 nonrefundable tax credit for each eligible dependent who is not a specified child. The credit would be reduced by $50 for each $1,000 (or fraction) your modified adjusted gross income exceeds filing-status thresholds ($400,000 joint; $200,000 separate; $300,000 other). The credit would be prorated in some cases for dependents who turn 18 during the year.

Refundable renter tax credit

If enacted, renters whose rent exceeds 30% of their adjusted gross income would be able to claim a refundable Renter Tax Credit for tax years after December 31, 2025. The credit equals a percentage of rent above 30% of AGI, with 100% for AGI ≤ $25,000 down to 25% for AGI up to $100,000. The IRS would be required to offer monthly advance payments (July–June) if you elect them, and Congress would give the IRS $50 million for outreach and systems for five years after enactment.

Bigger credit for small rehab projects

If enacted, small historic rehabilitation projects placed in service after December 31, 2025 could elect a 30% rehabilitation tax credit instead of 20%, subject to a cap of $3,750,000 (or $5,000,000 for qualifying rural projects). Taxpayers who elect the small‑project rule could transfer part or all of the credit under new certification and reporting rules.

Startup credit for family child care

If enacted, licensed family child care providers who cared for at least two non-related children could get a nonrefundable startup credit up to $5,000 for eligible startup costs. The credit would be limited to one per taxpayer, disallow double benefits with other credits, and would sunset seven years after enactment.

New middle-income housing credit

If enacted, the bill would create a Middle‑Income Housing Credit for buildings placed in service after December 31, 2025. The program would apply to projects where most units are rent‑restricted for households at or below 100% of area median income and include rules for rehabilitation spending and 15‑year credit periods. Many procedural, allocation, and compliance rules would govern how housing agencies and taxpayers claim the credit.

Big clean energy and factory credits

If enacted, the bill would change many clean-energy and advanced manufacturing tax rules. It would extend and restore eligibility for several energy credits, create large new investment credits (30%) for advanced battery projects, long-distance transmission, water reuse, and recycling property, add domestic-content and transferability rules, and adjust phaseout and deadline dates. Many credits require prevailing-wage and apprenticeship rules and some have multi-billion dollar caps or allocation processes.

Home energy and buyer credit rules

If enacted, the bill would change several home-related tax rules. Home energy credits would get new timing and percent rules and a product ID requirement would be added for many energy-improvement items placed in service after 2025. The bill would also move a homebuyer acquisition cutoff date later and exclude some State energy subsidies and certain state hazard-mitigation payments from income for tax years after 2025. Some IRS procedural rules for first-time homebuyer claims would be treated as clerical errors.

Monthly child allowance changes

If enacted, the bill would replace the prior annual child tax credit with a new monthly child allowance for tax years after 2025. Monthly payments would be paid each month and would be larger for younger children and infants. The allowance would be reduced month-by-month based on your modified adjusted gross income. The bill would also make months of future child credit ineligible after final fraud or certain denial findings unless you meet new IRS information requirements.

Refundable caregiver expense credit

If enacted, the bill would create a refundable Working Family Caregivers credit equal to 30% of qualifying caregiving costs above $2,000, capped at $5,000 per year. The credit would phase out by $100 for every $1,000 your MAGI exceeds $150,000 (joint) or $75,000 (other). The bill would also require you to put the care recipient's name and TIN and the certifying practitioner's ID on your tax return to claim the credit.

Student loan and Pell tax change

If enacted, the bill would cap deductible student loan interest at $2,500 per person per year for tax years after 2025. The bill would also exclude discharged education loan amounts from taxable income for discharges after December 31, 2025. In addition, Pell Grants used for qualified tuition and related expenses would be excluded from income for tax years after December 31, 2025.

Housing developer tax changes

If enacted, the bill would help developers by preventing certain basis reductions for low-income housing tax credit projects and by creating a Neighborhood Homes credit for affordable-for-sale units sold to qualified buyers. At the same time, the bill would limit purchaser basis for buildings placed in service less than 10 years before acquisition for buildings placed in service after 2025, which could reduce depreciation deductions for buyers.

Cap future out‑of‑pocket increases

If enacted, starting with plan years on or after January 1, 2027, the yearly limit on cost‑sharing (the out‑of‑pocket maximum) would be capped by a formula tied to the 2025 limit and recent premium growth. This would slow how fast the out‑of‑pocket maximum can rise in future years.

Change to Premium Tax Credit rules

If enacted, the Premium Tax Credit would use a new sliding income‑tier schedule tied to percent of the poverty line for tax years after December 31, 2025. The bill would also remove the 400% FPL statutory cap on eligibility for taxable years after December 31, 2025 so higher‑income households could qualify under the new schedule.

Free care rides and near‑free plans

If enacted, people with household income at or below 138% of the federal poverty line and enrolled in applicable plans would get free non‑emergency medical transportation and certain services in plan years 2026–2027. For 2026–2028 the bill would also make plans cover nearly all costs (plan share = 99%) for those enrollees with federal payments to issuers. The bill would create a continuous enrollment window for that income group through December 31, 2028.

Tenant protections and LIHTC timing

If enacted, LIHTC rules would give tenants new protections and change project‑and‑unit tests for properties placed in service after December 31, 2025. Owners would generally be barred from denying or ending leases of domestic‑violence victims for activity related to that victimization. The bill also protects owners from credit recapture if they rebuild after casualty losses within set timeframes, adds a 61‑day notice rule for foreclosures before credit‑period termination, and broadens tenant purchase options in certain agreements.

Child care credit becomes refundable

If enacted, the bill would make the child and dependent care tax credit refundable for taxpayers who live in the United States for more than half the year. This change would start for tax years after December 31, 2025. It would let families who owe little or no tax still receive the credit as a cash refund.

More outreach and free vaccines

If enacted, group and individual health plans and Medicare would cover ACIP‑recommended vaccines with no cost‑sharing for plan years starting on or after enactment and before January 1, 2030, for vaccines recommended as of October 25, 2024. The bill would also give HHS $65 million for affordability work and $105 million for culturally and linguistically appropriate Exchange outreach (FY2026–FY2028), and set aside Navigator grant funds from user fees for 2026–2028 to help people enroll.

Higher LIHTC state caps and rules

If enacted, states would get larger Low‑Income Housing Tax Credit (LIHTC) allocations and new allocation rules starting after December 31, 2025. The bill raises per‑capita and minimum state amounts for 2026, adds a 5% state ceiling increase for rural projects, and removes some population caps for qualified census tracts so more areas can qualify for LIHTC benefits. Agencies must follow new qualified allocation plans and preferences when awarding credits.

Neighborhood homes tax credit

If enacted, states would run a Neighborhood Homes Credit to help build owner‑occupied affordable homes. State agencies would set allocation plans, monitor projects, and award credits. If you sell a qualified home within five years, you would generally repay part of the gain under a sliding scale, though agencies can waive repayment for hardship.

Changes to tax-exempt housing bonds

If enacted, the bill would let projects financed by certain tax-exempt facility bonds use the LIHTC average income test for elections made after March 23, 2018. It would also revise when a new bond counts as a refunding issue if a loan repayment is used within 12 months to make a new loan, but that treatment would be limited to principal not exceeding the refunded principal and applies only where 95% or more of the original issue's net proceeds were used for those projects. The bill would extend the look-back period for removing a one-refunding limit from 4 years to 10 years. Subsections (a) and (c) would apply to refunding issues issued on or after enactment; subsection (b) would apply to repayments of loans received after July 30, 2008.

Farm disaster aid tax exclusion

If enacted, certain agricultural disaster and crop assistance payments from listed programs would be excluded from gross income for tax years after December 31, 2025. Farmers and producers who get payments from the named programs would not report those amounts as federal taxable income.

Sponsors & CoSponsors

Sponsor

Thompson (CA)

CA • D

Cosponsors

  • Chu

    CA • D

    Sponsored 12/18/2025

  • Moore (WI)

    WI • D

    Sponsored 12/18/2025

  • Boyle (PA)

    PA • D

    Sponsored 12/18/2025

  • Beyer

    VA • D

    Sponsored 12/18/2025

  • Evans (PA)

    PA • D

    Sponsored 12/18/2025

  • Schneider

    IL • D

    Sponsored 12/18/2025

  • Panetta

    CA • D

    Sponsored 12/18/2025

  • Gomez

    CA • D

    Sponsored 12/18/2025

  • Horsford

    NV • D

    Sponsored 12/18/2025

  • Del. Plaskett, Stacey E. [D-VI-At Large]

    VI • D

    Sponsored 12/18/2025

  • Suozzi

    NY • D

    Sponsored 12/18/2025

  • Bell

    MO • D

    Sponsored 12/18/2025

  • Craig

    MN • D

    Sponsored 12/18/2025

  • DeLauro

    CT • D

    Sponsored 12/18/2025

  • Garamendi

    CA • D

    Sponsored 12/18/2025

  • Goldman (NY)

    NY • D

    Sponsored 12/18/2025

  • Johnson (TX)

    TX • D

    Sponsored 12/18/2025

  • Kennedy (NY)

    NY • D

    Sponsored 12/18/2025

  • Matsui

    CA • D

    Sponsored 12/18/2025

  • McBride

    DE • D

    Sponsored 12/18/2025

  • McDonald Rivet

    MI • D

    Sponsored 12/18/2025

  • McGarvey

    KY • D

    Sponsored 12/18/2025

  • Mrvan

    IN • D

    Sponsored 12/18/2025

  • Quigley

    IL • D

    Sponsored 12/18/2025

  • Salinas

    OR • D

    Sponsored 12/18/2025

  • Titus

    NV • D

    Sponsored 12/18/2025

  • Scholten

    MI • D

    Sponsored 12/18/2025

  • Larson (CT)

    CT • D

    Sponsored 12/18/2025

  • Davis (IL)

    IL • D

    Sponsored 12/18/2025

  • Sanchez

    CA • D

    Sponsored 12/18/2025

  • Sewell

    AL • D

    Sponsored 12/18/2025

  • DelBene

    WA • D

    Sponsored 12/18/2025

  • Courtney

    CT • D

    Sponsored 1/7/2026

  • Costa

    CA • D

    Sponsored 1/8/2026

  • Adams

    NC • D

    Sponsored 1/8/2026

  • Riley (NY)

    NY • D

    Sponsored 1/8/2026

  • Vindman

    VA • D

    Sponsored 1/12/2026

  • Mannion

    NY • D

    Sponsored 1/30/2026

  • Frankel, Lois

    FL • D

    Sponsored 1/30/2026

  • Carson

    IN • D

    Sponsored 1/30/2026

  • Del. Norton, Eleanor Holmes [D-DC-At Large]

    DC • D

    Sponsored 1/30/2026

Roll Call Votes

No roll call votes available for this bill.

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