The "All-Americans Tax Relief Act of 2025" proposes significant amendments to the Internal Revenue Code, primarily focusing on expanding tax relief for individuals and families. A core provision involves the Earned Income Tax Credit (EITC), which would see decreased phaseout percentages and increased maximum credit amounts across various family structures, with adjustments for cost-of-living after 2027.

The bill also establishes a new, fully refundable Child Tax Credit (CTC), allowing $2,000 for up to three qualifying children and an additional $500 for other qualifying children, subject to income limitations and requiring a Social Security Number. This new credit replaces the existing CTC provisions and includes inflation adjustments, aiming to provide broader support to families.

Several new deductions are introduced and made available to non-itemizers, significantly broadening their accessibility. These include the removal of the Adjusted Gross Income threshold for medical expense deductions, a new deduction for qualified daycare expenses for dependents under age seven, and a deduction for public transit commuting expenses for eligible individuals.

Further deductions for non-itemizers include up to $2,500 for qualified tutoring expenses for dependents in eligible schools, and a deduction of up to $2,500 for interest paid on credit card debt. Additionally, the bill allows a deduction for rent payments for a primary residence, subject to income phaseouts, providing relief to renters.

The legislation also modifies the exclusion of discharge of indebtedness, allowing individuals to exclude such income from taxation and giving this exclusion precedence over others. To help fund these expanded benefits, the bill proposes an increase in the long-term capital gains tax rate from 20 percent to 25 percent. All these changes are set to apply to taxable years beginning after December 31, 2026, or for debt incurred after that date for the discharge of indebtedness provision.