EITC Information for Members of the Military |
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Members of the Military who earn Combat Pay
The Earned Income Tax Credit (EITC) is a tax credit for certain people who work and don't earn high incomes. A tax credit usually means more money in your pocket; the EITC can reduce the amount of tax you owe and you may also get a refund. Although certain combat pay may be nontaxable to you (See Combat Zone Exclusion in Publication 3, Armed Forces Tax Guide, for more information), you can choose to include this pay in your earned income when figuring the EITC. The amount of your nontaxable combat pay should be shown in Form(s) W-2, with code Q.
The Working Families Tax Relief Act of 2004 and the Gulf Opportunity Zone Act of 2005 give military personnel the option of treating excludable combat pay (but not BAH or BAS) as earned income for purposes of the EITC. This could help military personnel avoid a situation in which the military pay exclusion leaves them with no earned income and thus no EITC. Under this provision, military personnel may opt to include all or none of their combat pay (but not just part of it) when calculating their EITC. If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. This provision has been extended to cover excludable combat pay received on or before December 31, 2007.
Will you qualify for the EITC this year? Tired of guessing? There's a lot to know about qualifying for EITC, but the most important thing to know is you can get help figuring it all out. The EITC Assistant is an interactive, online tool that helps you determine whether or not you qualify for the EITC by answering questions about yourself, your children, your living situation, and your income. You will see the results of the eligibility check right away on your computer screen. The Assistant can be used by individuals, tax practitioners, employers, community and public service organizations, and IRS partners. The EITC Assistant is both easy to follow and simple to navigate.
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Page Last Reviewed or Updated: February 13, 2008