American Affordability Act of 2025

This section significantly increases the per capita and minimum amounts of Low-Income Housing Tax Credits (LIHTC) that states can allocate annually. For calendar year 2026, the per capita amount rises from $1.75 to $4.25, and the minimum amount increases from $2,000,000 to $4,876,000, with further adjustments for inflation in subsequent years.

This provision amends the LIHTC rules to broaden the categories of students who can reside in low-income housing units without disqualifying the unit. It specifies exceptions for students who are married, disabled, veterans, have qualifying children, are victims of domestic abuse or human trafficking, or are former foster youth/homeless youth, provided they meet income limitations.

This provision increases the eligible basis for a portion of a building to 150% if at least 20% of its residential units are designated for households with incomes not exceeding the greater of 30% of area median gross income or 100% of the federal poverty line, and the housing credit agency designates the increase as financially necessary.

This section terminates the "qualified contract" option for LIHTC buildings that receive allocations after January 1, 2026. The qualified contract option allowed owners to exit the LIHTC program after 15 years by selling the property at a formula-driven price, potentially leading to the loss of affordable units. For existing buildings, it modifies the valuation to take into account rent restrictions.

This section establishes a new investment tax credit (20% of qualified conversion expenditures, up to 30% in high-cost areas) for converting eligible commercial buildings into qualified affordable housing. The building must be at least 20 years old and was nonresidential property before conversion. At least 20% of units must be rent-restricted for individuals at 80% or less of area median income for 30 years. There's a national credit limitation of $12 billion, with additional amounts for economically distressed areas.

This section establishes a new refundable tax credit for building or substantially rehabilitating homes in qualified census tracts and selling them at an affordable price to qualified homeowners. The credit amount is the lesser of the development cost gap (cost minus sale price), 40% of eligible development costs, or 32% of the national median new home sale price (up to $50,000 for owner-occupied rehabilitations). It includes a 5-year repayment requirement if the home is sold early.

This section establishes a new refundable tax credit for first-time homebuyers, equal to 10% of the purchase price, up to $15,000. It includes phase-outs based on area median income and area median purchase price. The credit is subject to recapture if the home is sold within a 4-year recapture period. An election allows the credit to be transferred to the mortgage lender at closing, with the lender providing an equivalent payment to the taxpayer.

This section establishes a new refundable tax credit for individuals who lease their principal residence and pay rent exceeding 30% of their adjusted gross income. The credit amount is a percentage of this excess, phased out based on income, and limited by 100% of the small area fair market rent. The Secretary is directed to establish a program for monthly advance payments of this credit.

This section amends Section 45Y of the IRC to restore the clean energy production credit's phase-out mechanism to be based on a determination of greenhouse gas emissions from electricity production (25% of 2022 levels) or 2032, whichever is later. It also removes previous restrictions on the credit for wind and solar facilities and leasing arrangements, effectively reinstating broader eligibility.

This section restores the requirement for a qualified product identification number for items of specified property placed in service after December 31, 2025, to be eligible for the energy efficient home improvement credit (Section 25C). It defines "qualified product identification number" and "qualified manufacturer" and outlines reporting requirements.

This section extends the termination date for the clean vehicle credit (Section 30D) from September 30, 2025, to December 31, 2032. It also modifies the domestic content requirements, gradually increasing the percentage of battery components and critical minerals that must be sourced from North America or free trade agreement countries to 100% by 2029.

This section establishes a new tax credit equal to 30% of expenditures paid for qualifying mitigation activities with respect to real property owned or leased by the taxpayer. Qualifying activities include improving roof strength, creating secondary water barriers, bracing walls, protecting openings, elevating dwelling units, installing flood vents, creating buffers against wildfires, and satisfying FORTIFIED or Wildfire Prepared Homes designations. The credit can be personal or business, and the percentage is reduced if a state contributes to the expenditure.

This section replaces the existing child tax credit (Section 24) with a new, fully refundable monthly child tax credit (Section 24A) and a credit for other dependents (Section 24B). The monthly credit is $300 per child aged 6-17 and 120% of that for children under 6 (800% for children under 1 month), with inflation adjustments. It includes phase-outs based on modified adjusted gross income. The Secretary is mandated to establish a program for monthly advance payments of this credit (Section 7527A), with provisions for presumptive eligibility, annual renewal, automatic eligibility for newborns, and resolution of competing claims.

This section enhances the Child and Dependent Care Tax Credit (Section 21) by increasing the applicable percentage to 50% (phasing down to 20% for higher incomes) and raising the maximum creditable expenses to $8,000 for one qualifying individual and $16,000 for two or more. It also makes the credit fully refundable for taxpayers with a principal abode in the U.S. or Puerto Rico and includes inflation adjustments.

This section makes the adoption tax credit (Section 23, redesignated as 36F) fully refundable and moves it to the refundable credits subpart. It also includes a transitional rule to treat carryforwards from the prior non-refundable credit as refundable. It directs the Secretary to provide guidance for a standardized third-party affidavit for verifying legal adoptions.

This section expands the American Opportunity Tax Credit (Section 25A) from 4 to 6 years of post-secondary education. For taxable years beginning in 2026, it temporarily makes the AOTC fully refundable (instead of 40% refundable). It also mandates an outreach campaign by the Treasury to inform the public about these changes.

This section restores an above-the-line deduction for union dues and expenses for employees. It also reinstates the miscellaneous itemized deduction for other unreimbursed employee business expenses (subject to the 2% adjusted gross income floor), which was previously suspended.

This section removes the 400% of poverty line income cap for eligibility for the premium assistance tax credit (Section 36B) and adjusts the applicable percentages to ensure that no individual pays more than 8.5% of their household income for a benchmark plan, even at higher income levels.

This section provides enhanced cost-sharing reductions and additional benefits (like non-emergency medical transportation and home health services) for low-income individuals (up to 138% of poverty line) in states that have not expanded Medicaid, for plan years 2026-2028. It also provides funding for outreach and navigator programs in these states and temporarily removes employer shared responsibility penalties for employers of these low-income individuals. It further increases the FMAP for newly eligible mandatory individuals in Medicaid expansion states.