New proposal calls for a $ 4,000 tax credit for travel within the country


COVID-19 has severely impacted the US economy. Lawmakers continue to argue over additional relief plans. It is now clear that the CARES law, which passed in March and provided stimulus checks to eligible Americans, will not provide enough support for Americans. A recent proposal – the Explore America Tax Credit – is to reward people who spend money to travel across the United States.

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Could Americans be paid to travel?

Perhaps. Some lawmakers are calling for tax relief for Americans who take vacations within the next two years. Supporters hope the additional spending could stimulate the economy. Opponents warn the bill ignores the immediate needs of millions of Americans who struggle to pay for essentials, like rent or medical bills.

The concept is currently known as the Explore America Tax Credit. If passed, it will allow tax filers to claim up to 50% of the expenses they incur during their domestic travel on future tax returns.

The Explore America tax credit reaches a maximum of $ 4,000, which means filers must accumulate $ 8,000 of qualifying expenses to claim the full $ 4,000.

Eligible expenses would include:

  • Plane ticket
  • Rail fare
  • Hotels or other accommodation
  • Recreation, such as amusement parks and other attractions
  • Meal at the restaurant

Any of these expenses incurred until the end of 2021 would be eligible for the credit.

What is a tax credit?

A tax credit is a dollar-for-dollar reduction in a filer’s tax liability. For example: Bob owes the IRS $ 4,000 based on his income and taxes paid during the year. Bob then applies a credit of $ 4,000 to his return. Now that responsibility is completely erased.

In addition, certain tax credits are refundable. This means that the government Pay filers if there is a negative tax debt. However, most credits are non-refundable. The most that a non-refundable tax credit can do is reduce a person’s tax payable to $ 0. It’s unclear what category the Explore America tax credit would fall into. Most likely, he will join the ranks of non-refundable credits.

Will the Explore America tax credit pass?

It is still too early to tell. A vacation spending tax credit could motivate Americans to stimulate the economy and create jobs in the tourism industry. Unfortunately, the tax credit may not provide as much relief as lawmakers hope.

Many Americans can’t afford to travel anytime soon

Millions of people are struggling with lost income. Many who to have managed to keep their jobs during the COVID-19 crisis are using every available dollar for emergency savings or debt repayment. Encouraging Americans to travel when they cannot afford it could lead more people to rack up unhealthy debt on their home. credit card. For these families, traveling would make their financial situation even worse.

Americans Won’t See Their Money For Months

A tax credit is not immediately payable. It is only available when filing a tax return. People who incur qualifying travel expenses this year should wait until 2021 to claim the Explore America tax credit – even if they need that financial relief sooner.

Forcing Americans to spend is no relief

Any “relief” measure that forces Americans to pay their own money first is not necessarily the relief Americans need right now. The Explore America Tax Credit appears to be a great benefit for people who have the money to travel. Unfortunately, this is a benefit that millions of people cannot take advantage of.

Traveling may not be safe

With so many COVID-19 hotspots emerging, it’s easy to argue that even domestic travel can be dangerous (even fatal, for some people) in the short term. Tourism could exacerbate an already devastating health crisis.

For these and other reasons, the Explore America tax credit may not pass. While this is a reasonable idea in theory, it ultimately can only complement aid such as a second dunning check, additional unemployment benefits, or the many other relief measures Americans need during the pandemic.

What if the tax credit passes?

If the Explore America tax credit passes, it will undoubtedly encourage many Americans to travel. But before you pack your bags, you will need to assess your personal situation:

  • Do you have money to travel or will it put you in debt? The latter is not worth it.
  • Should you save more for emergencies or pay off an existing debt? If so, you should probably skip the trip, although you can technically afford to pay for it directly.
  • Do you have any health problems? If so, it may be safer to stay closer to home.

If you are going to take trips this summer or later this year, better use a travel reward card that comes with economic benefits. Some travel cards, for example, offer free checked baggage, which can be huge if you are a large family flying.

What if the credit doesn’t flow and you still want to travel?

Americans have traveled for years without getting a tax credit in return, so if you can afford the trip and feel safe, go for it. But if this is the case, there are still a few steps you can take to lower your costs. For example, you can try cashing in airline miles you already have or using hotel points to cover your stay. Keep in mind, however, that from a security standpoint, renting a private vacation home may be better than booking a hotel room, and a private home is not something that you can use to cover points. On the other hand, in a private house, you can cook your own meals, which saves you money on restaurants.

Driving to your destination rather than flying can also save you a lot of money. And it might also be a safer bet, especially if you don’t have to stop several times along the way.

While summer 2020 – and the rest of the year, for that matter – isn’t the optimal time to travel, there are mental benefits to getting out and about. And if you find yourself partially reimbursed via a tax credit, that’s even better.


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