The Earned Income Tax Credit (EITC or EIC) is a monetary benefit given to certain lower-income, working taxpayers when filing their tax return. Some military senior enlisted and officers – who wouldn’t qualify for this refundable tax credit under normal conditions – are legitimately benefiting from this tax break. To qualify for the EITC, you have to fall within the following income limits.
- $46,997 ($52,427 married filing jointly) with three or more qualifying children
- $43,756 ($49,186 married filing jointly) with two qualifying children
- $38,511 ($43,941 married filing jointly) with one qualifying child
- $14,590 ($20,020 married filing jointly) with no qualifying children
When service members deploy to a combat zone and receive tax-free pay for a large part of the year, they may become eligible to receive the EITC. On your W-2, taxable pay is shown in box 1 and non-taxable pay is shown in box 12, Code Q. You can choose to only use the amount in box 1 for the EITC.
Ex: First Sergeant Smith (E-8), is married and has three children. She was deployed to Afghanistan from January 2014 – August 2014 (8 months) and received non-taxable combat pay during that time. On her W-2, box 1 shows $19,070.40 and box 12, Code Q shows $38,140.80. Since the taxable income amount shown in box 1 is under $52,427 (the amount shown above for MFJ), she’s eligible to receive up to $6,143.
In true IRS fashion, there are several additional rules you must meet and forms you must attach to your 1040 to receive the funds. For more information on this credit or how to properly complete your tax return, contact me.