H.R. 6645: Working Families Disaster Tax Relief Act

The Working Families Disaster Tax Relief Act aims to support taxpayers who have been affected by disasters. Specifically, it allows these taxpayers to use their earnings from the year before a disaster occurred when determining their eligibility for certain tax credits. Here’s a breakdown of what the bill entails:

Key Provisions

• Eligibility for Tax Credits: The bill enables disaster-affected taxpayers to opt to use their income from the previous taxable year to evaluate their eligibility for the earned income credit and the refundable portion of the child tax credit.
• Definition of Disaster-Affected Taxpayer: A taxpayer qualifies as disaster-affected if their main residence or place of work is in a designated disaster zone that was affected during the period of a declared disaster. This encompasses both those who remain in the area and those who were displaced due to the disaster.
• Qualified Disasters: The term "qualified disaster" refers to events for which a major disaster declaration has been issued by the President, allowing for federal disaster relief assistance.
• Application of the Act: The changes proposed in this bill would take effect for tax years starting after December 31, 2024.

Amendments to Tax Code Sections

The bill specifically amends two sections of the Internal Revenue Code:

• Child Tax Credit (Section 24): It modifies the rules regarding the qualifying income for this credit, allowing the substitution of the preceding year’s income.
• Earned Income Credit (Section 32): Similar amendments are made here to adopt the use of prior year income for assessing eligibility for this credit as well.

Definitions and Context

• Qualified Disaster Area: Areas declared by the President as needing federal assistance after a major disaster.
• Qualified Disaster Zone: Specific regions within the qualified disaster area determined to be eligible for individual and public assistance.

Summary of Impact

The act aims to provide tax relief to families and workers who face financial hardship due to natural disasters by allowing them to qualify for significant tax credits based on more stable income from the previous year, rather than the potentially lower income they might have earned during a disaster-affected year.

Relevant Companies

None found