The voices of Tax Policy Center's researchers and staff
The earned income tax credit (EITC) lifts millions of workers out of poverty each year. But older workers who do not live with minor children lose their eligibility for the credit once they turn 65. We could help a growing group of low-income, older workers make ends meet by allowing them to continue to claim the EITC until they reach the full retirement age of Social Security – currently 66 and scheduled to rise to 67 for workers born in 1960 and after.
Over 4.2 million people age 65 and over were living below the poverty level in 2015. Many are no longer working – but for those who are, even a few extra dollars from the EITC could be helpful. If Congress expands eligibility for the credit it could support older workers without minor children living at home who would get about $500 annually.
In 1993, when the EITC was extended to workers who did not reside with children, the credit fit neatly with Social Security benefits. When a low-income worker retired at 65, she’d lose her EITC but could immediately claim full Social Security benefits. Starting in the early eighties, Congress gradually raised the age of eligibility for full Social Security benefits. But it made no parallel change in EITC eligibility. Today, older adults still lose their EITC at 65, well before they are eligible for full Social Security. Of course, they still can claim partial Social Security benefits starting at age 62.
Expanding the EITC to older workers would be relatively inexpensive, both because the benefit is modest and the number of low-income older workers is small (though it is growing). The Tax Policy Center estimates that such a change would cost $1.0 billion over 10 years. Almost three-quarters of the benefit would go to older workers in the bottom two-fifths of the income distribution, who makes less than about $50,000 annually.
Congress could make even more ambitious changes. For example, it could increase the EITC eligibility age in parallel with the scheduled increases in the full retirement age for Social Security. Or it could eliminate the maximum eligibility age for the credit and allow older adults to claim the EITC for the rest of their working lives. However, both options would add to the price tag.
As AARP pointed out several years ago, older workers with incomes low enough to qualify for the EITC are among the most vulnerable Americans. Removing or increasing the EITC age restriction would provide a modest additional source of support for struggling, older workers.
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