What Members of the Military Should Know about the Earned Income Tax Credit

Earned Income Tax Credit or EITC is a refundable form of tax credit that applies to low-income families. People who work or have worked for less than $53,930 can file for this tax credit. This program also includes members of the military and the veterans.

Normally, filing for a tax credit can lead to refunds for the taxpayers. With EITC an eligible person can reduce their taxes or even get a refund. If you have worked in the military, you need to know a few things before filling for EITC. These include:

  • Nontaxable pay may come from combat pay. These may include a basic allowance for housing, basic allowance for subsistence, etc. In most cases for the military members, it is not earned income for EITC.
  • Military personnel can choose to have their combat pay combined with their earned income. Choosing this option can lead to either an increase or decrease in the tax credit. Military members can learn about their nontaxable combat pay from their W-2 Form, box 12, with the code Q. To know what’s best for them they should calculate their taxes in both ways.It is up to them to do some research and learns what works in their favor.
  • When filing for EITC, it is not allowed to include parts of their combat pay, as it is mandatory for the members of the armed forces to include the entire nontaxable combat pay that they received. In the case of a couple with two members filing for a joint return, there are a few options that they consider:
  • Only one of them chooses to file his/her nontaxable combat pay, and the other one can choose not to file any.
  • Both the members can choose to file all their nontaxable combat pay.
  • Both of them can choose not to file any of it.
  • If the military person is living outside the US on extended active duty, they are considered to come back to figure out their EITC during that period. Usually, these duties last at least 90 days but can also last for a longer time. Even if they do not serve their extended active duty for more than 90 days, but they are still considered to be on it, once they have begun.

Related: Best Online Tax Preparation Services 2018: Turbo Tax vs. H&R Block vs. Tax Act (Bonus Review)

The IRS is not allowed to hand over the EITC or ACTC refunds before mid-February, due to legal restrictions. The earliest of these funds are made available to the taxpayers starting Feb. 27, 2018. These funds are made available in the taxpayer’s bank account or on their debit cards.

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