Oregon retirement income tax credit faces decline amid inflation and stagnant income limits

Oregon's House Committee on Revenue convened on February 11, 2025, to discuss significant updates regarding the state's retirement income tax credit, aimed at providing financial relief to low-income individuals with pension income. The credit, which is available to residents aged 62 and older, is calculated at 9% of qualified pension income, including various retirement plans such as 401(k)s, IRAs, and public retirement systems.

A key focus of the meeting was the means testing associated with the credit, which has not been adjusted for inflation since its inception in 1991. To qualify, single taxpayers must have social security benefits of $7,500 or less, while joint filers must not exceed $15,000. Additionally, total household income, including social security, must remain below $22,500 for singles and $45,000 for joint filers. As inflation continues to rise, fewer taxpayers are able to meet these criteria, leading to a decline in the number of beneficiaries from approximately 5,500 in 2013 to an estimated 4,300 in 2023.

The committee highlighted that the credit's overall cost has remained stable at around $6.7 million annually, but the number of eligible taxpayers is decreasing. This trend is expected to continue, with projections indicating that the cost could drop to about $400,000 in the coming years due to the impact of inflation on social security benefits.

In addition to the tax credit discussion, the committee also opened an informational meeting on property foreclosures, signaling ongoing legislative efforts to address housing stability in Oregon. The meeting concluded without public testimony, but it underscored the committee's commitment to reviewing and potentially reforming financial assistance programs for vulnerable populations.

As the state grapples with the implications of inflation on tax credits and housing, these discussions will be crucial in shaping future policies that aim to support low-income residents in Oregon.