Young workers without kids will get a boost this tax season thanks to the American Rescue Plan's expansion of the earned income tax credit.

Previously, Americans age 19 to 24 without dependent children were barred from claiming the credit, a benefit to low- and middle-income workers. The Biden administration enhanced the credit for the 2021 tax year, which means more workers are eligible to receive larger amounts through the benefit.  

For the 37% of workers 19 to 24 who are now eligible to receive the credit, the expansion will mean an average boost of $820, according to a study from the Institute on Taxation and Economic Policy. If an individual has no other tax liability, that money will be sent to them in their refund for the year.  

"For a lot of people in that age range, that can be a pretty meaningful amount of money for them to receive," said Aidan Davis, a senior state policy analyst at the Institute on Taxation and Economic Policy and the author of the study.

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The enhanced credit

The American Rescue Plan passed last year expanded the existing earned income tax credit by boosting the full benefit to $1,502 from $538 and allowing workers age 19 to 24 and 65 and older without dependent children to claim the credit.

Previously, only workers with children were able to claim the credit, which left out some of the workers with the lowest incomes as well as noncustodial parents, which means those who do have children who don't live with them for most of the time.

It also increased the income caps for claiming the full credit to $21,430 from $15,820 for single filers and to $27,380 from $21,710 for those married filing jointly.

These changes mean that about 5 million young workers would regain access to the federal credit and receive an additional $4 billion in benefits in 2022. Overall, the change would help about 17 million Americans, according to a separate study from the Center on Budget and Policy Priorities.

Those with the lowest incomes would be most targeted, which would also lift incomes of nearly 1 million Hispanic adults and 600,000 Black adults, the Institute on Taxation and Economic Policy study found.

"It's super-targeted to low-income folks, and it impacts a really diverse group of filers," said Davis. The group that is newly eligible is also largely new in the workforce and just getting a foothold, she added. An additional $800 in a tax refund can help them pursue higher education or cover necessary costs.

"Inflation is impacting this group just like everyone else," said Davis. "This credit could just be going to help these people pay the bills."

Filing taxes is important this year

To be sure, the enhanced credit is only for the 2021 tax year.

A further expansion of the earned income tax credit was included in Biden's $1.75 trillion Build Back Better legislation, but negotiations on the bill have stalled without full support in the Senate.

Still, all Americans should file tax returns this year, even if they don't traditionally do so. That's because they could be eligible to claim credits like the earned income tax credit or the child tax credit, which were enhanced only for this year.

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