The federal government provides tax relief to qualifying individuals in the form of tax credits. Tax credits are valuable because they are dollar-for-dollar reductions of your tax liability. In some cases, they may result in tax refunds.
You can elect to include your nontaxable combat pay in earned income for the earned income credit. If you make the election, you must include in earned income all nontaxable combat pay you received. If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election.
The amount of your nontaxable combat pay should be shown on your Form W-2 in box 12 with code Q. Electing to include nontaxable combat pay in earned income may increase or decrease your EIC.
Figure the credit with and without your nontaxable combat pay before making the election. Whether the election increases or decreases your EIC depends on your total earned income, filing status, and number of qualifying children.
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Ready for next lesson? Learn more about Earned Income Credits
To be eligible for the EIC, you must fall within certain income guidelines. To qualify for the full amount of the EIC, your earned income and AGI must each be less than:
To determine your eligibility for the Earned Income Credit (EIC), the following conditions apply to what is considered a qualifying child.
Most individuals (those who file on a calendar year basis) must file their federal income tax returns for a given year by April 15th of the following year, unless they apply for or are entitled to an extension.
Military families face plenty of financial challenges. If you’re saving for college or retirement, buying a home, or wondering how to help secure your family’s financial future, don’t overlook these five important benefits available to military members.
As a member of the military, planning and preparing your estate is of vital importance. Why is estate planning so critical? Because, at your death, you leave behind the people you love and all your worldly goods.
Planning for retirement is an important and sometimes difficult endeavor. As a member of the military, you may have some special opportunities and challenges when preparing financially for retirement. Often, retiring from the military leads to a second civilian career–and a second retirement.
The earned income credit (EIC) is available to certain individuals who work. This credit is refundable–if the amount you claim exceeds your tax liability (even if your liability is zero), you’ll receive payment for the difference.