For many Americans, working during retirement can mean the difference between struggling financially and having the security they deserve. Unfortunately, older Americans often struggle to find work due to age discrimination or health issues.
Sadly, even those seniors who do manage to keep a job are at a disadvantage because they're generally not eligible for an important tax break. If elected, Democratic U.S. presidential nominee Joe Biden has vowed to change that.
Biden wants working seniors eligible for this valuable tax credit
In his plan for older Americans, former Vice President Biden has vowed to change the rules if elected president to make the Earned Income Tax Credit (EITC) available even to workers ages 65 and over who are without qualifying children.
Image source: Getty Images.
The Earned Income Tax Credit is one of the most valuable tax breaks available. Like all tax credits, it provides a dollar-for-dollar reduction in taxes owed. But the EITC is even better than many credits, as it's refundable. That means if you qualify for it, you could potentially get back more in federal taxes than you pay in.
The table below shows the income limits to qualify for the credit for 2020, depending on your filing status and the number of qualifying children you claim.
| Filing Status | No Qualifying Children | 1 Qualifying Child | 2 Qualifying Children | 3 Qualifying Children |
|---|---|---|---|---|
| Single, Head of Household, or Widowed | $15,820 | $41,756 | $47,440 | $50,954 |
| Married Filing Jointly | $21,710 | $47,646 | $53,330 | $56,844 |
Table source: IRS.
And for 2020, the maximum credit is:
- $6,660 with three or more qualifying children
- $5,920 with two qualifying children
- $3,584 with one qualifying child
- $538 with no qualifying children
To understand how valuable this tax break is, consider a senior with no children who could qualify for the credit based on income and who owes $100 in federal taxes. That senior could end up getting $438 back from the IRS when filing taxes -- if they weren't excluded by the EITC's age restrictions. That's a lot of money for someone with an income under $15,820 per year.
Biden has indicated that the EITC is "one of the most effective strategies for helping low-wage workers achieve a living wage." Senior retirees who are doing the best they can to make ends meet by working -- even if their wages aren't very high -- could benefit if he's elected and makes this change.
The GOP declined to include changes to the Earned Income Tax Credit in the 2017 Tax Cuts and Jobs Act, which was the major Republican-led tax reform signed into law in President Trump's first term. And while the President has outlined several tax changes he'd make in his second term, an expansion of the EITC to elderly workers has not yet been on the list.
Will eligibility for the Earned Income Tax Credit change?
Most tax rules can't be changed without an act of Congress, so even if Biden takes the country's highest office, it's not clear how much of his plan he'll be able to implement.
If he's able to usher in this change, seniors with limited income who wish to continue working could benefit from a significant income boost, thanks to this refundable tax credit. And Biden has also put forth a plan to help reduce age discrimination, which would potentially make it easier for older workers to actually find a job into their 60s or 70s.
Still, with no guarantee of any of Biden's plans coming to fruition, older workers shouldn't count on extra help from Washington. Instead, if you're worried about making ends meet in retirement, be sure to explore options for increasing your Social Security benefit, saving money by relocating, and making any investment income last by choosing a safe withdrawal rate.
