Working Families Tax Cut Act in plain language
1: Short title
This section would let the Act be officially called the Working Families Tax Cut Act.
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1. Short title This Act may be cited as the Working Families Tax Cut Act .
2: Standard deduction renamed guaranteed deduction
This section would rename the standard deduction as the guaranteed deduction throughout the Internal Revenue Code of 1986. In Section 63 of the Code, every place the words standard deduction appear would be replaced with guaranteed deduction, including in the headings of subsection (c) and of paragraphs (2), (3), (5), (6), and (7)(A) of that subsection. The same word swap would be made, as a conforming change, in Section 1(g)(4)(A), in Section 56(b)(1)(D) (including its heading), in Section 861(b), in Section 862(b), in Section 1398(c) (including the headings of that subsection and of paragraph (3)), in Section 3402 (each place it appears), in Section 6012 (each place it appears), in Section 6013(b)(3)(A), in Section 6014(b)(4), and in Section 6334 (each place it appears). These renaming amendments would apply to taxable years beginning after December 31, 2025.
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2. Standard deduction renamed guaranteed deduction (a) In general Section 63 of the Internal Revenue Code of 1986 is amended— (1) by striking standard deduction each place it appears and inserting guaranteed deduction , and (2) in subsection (c)— (A) in the heading, by striking Standard deduction and inserting Guaranteed deduction , (B) in the heading of paragraph (2), by striking standard deduction and inserting guaranteed deduction , (C) in the heading of paragraph (3), by striking standard deduction and inserting guaranteed deduction , (D) in the heading of paragraph (5), by striking standard deduction and inserting guaranteed deduction , (E) in the heading of paragraph (6), by striking standard deduction and inserting guaranteed deduction , and (F) in the heading of paragraph (7)(A), by striking standard deduction and inserting guaranteed deduction . (b) Conforming amendments (1) Section 1(g)(4)(A) of such Code is amended by striking standard deduction and inserting guaranteed deduction . (2) Section 56(b)(1)(D) of such Code is amended— (A) in the heading, by striking Standard deduction and inserting guaranteed deduction , and (B) by striking standard deduction and inserting guaranteed deduction . (3) Section 861(b) of such Code is amended by striking standard deduction and inserting guaranteed deduction . (4) Section 862(b) of such Code is amended by striking standard deduction and inserting guaranteed deduction . (5) Section 1398(c) of such Code is amended— (A) in the heading, by striking standard deduction and inserting guaranteed deduction , (B) in the heading of paragraph (3), by striking standard deduction and inserting guaranteed deduction , and (C) by striking standard deduction and inserting guaranteed deduction . (6) Section 3402 of such Code is amended by striking standard deduction each place it appears and inserting guaranteed deduction . (7) Section 6012 of such Code is amended by striking standard deduction each place it appears and inserting guaranteed deduction . (8) Section 6013(b)(3)(A) of such Code is amended by striking standard deduction and inserting guaranteed deduction . (9) Section 6014(b)(4) of such Code is amended by striking standard deduction and inserting guaranteed deduction . (10) Section 6334 of such Code is amended by striking standard deduction each place it appears and inserting guaranteed deduction . (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.
3: Bonus guaranteed deduction for 2026 and 2027
This section would add a new paragraph to Section 63(c) of the Internal Revenue Code of 1986 creating a temporary bonus added on top of the guaranteed deduction. For any taxable year beginning after December 31, 2025, and before January 1, 2028, the guaranteed deduction would be increased by a bonus guaranteed deduction. The bonus amount would be $4,000 for a joint return or a surviving spouse, $3,000 for a head of household, and $2,000 for anyone filing in any other status. For taxable years beginning after 2026, each of these dollar amounts would be increased for inflation, using the cost-of-living adjustment formula in Section 1(f)(3) but substituting 2025 for 2016 in that formula; if the resulting increase is not already a multiple of $50, it would be rounded down to the next lowest multiple of $50. The bonus guaranteed deduction would be reduced, but never below zero, by 5 percent of the amount by which the taxpayer's modified adjusted gross income exceeds a threshold amount. The threshold amount would be $400,000 for a joint return or a surviving spouse, $300,000 for a head of household, and $200,000 for anyone filing in any other status. For this purpose, modified adjusted gross income would mean adjusted gross income increased by any amount excluded from gross income under Section 911, 931, or 933 of the Code (income earned abroad or in certain U.S. territories). These amendments would apply to taxable years beginning after December 31, 2025.
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3. Bonus guaranteed deduction for 2026 and 2027 (a) In general Section 63(c) of the Internal Revenue Code of 1986 (as amended by section 2) is amended by adding at the end the following new paragraph: (8) Bonus guaranteed deduction for taxable years 2026 and 2027 (A) In general In the case of a taxable year beginning after December 31, 2025, and before January 1, 2028, the guaranteed deduction shall be increased by the amount of the bonus guaranteed deduction. (B) Bonus guaranteed deduction For purposes of this paragraph, the bonus guaranteed deduction is— (i) $4,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)), (ii) $3,000 in the case of a head of household, and (iii) $2,000 in any other case. (C) Adjustment for inflation In the case of a taxable year beginning after 2026, each dollar amount in subparagraph (B) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2025 for 2016 in subparagraph (A)(ii) thereof. If any increase under this subparagraph is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50. (D) Limitation on bonus guaranteed deduction based on modified adjusted gross income (i) In general The bonus guaranteed deduction determined under subparagraph (B) shall be reduced (but not below zero) by 5 percent of so much of the taxpayer's modified adjusted gross income as exceeds the threshold amount. For purposes of the preceding sentence, the term modified adjusted gross income means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933. (ii) Threshold amount For purposes of clause (i), the threshold amount is— (I) $400,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)), (II) $300,000 in the case of a head of household, and (III) $200,000 in any other case. . (b) Effective date The amendments made by this subsection shall apply to taxable years beginning after December 31, 2025.