Alerts for Special Situations

Military Personnel

Qualifying Child Residency Rules for Active Duty Military

Tto be a qualifying child for EITC purposes, the child must have lived with the taxpayer in the United States for more than half the year. For tax purposes, U.S. military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period.  

For more information on qualifying residency rules, see Publication 596.

Nontaxable combat pay election  

Nontaxable pay for members of the Armed Forces is not considered earned income for the EITC. Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS).

You and your spouse can each elect to have your nontaxable combat pay included in earned income for the earned income tax credit. Find the amount of your nontaxable combat pay 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 EITC. Calculate your taxes both ways to find out what's best for you.

Find more Tax Information for Members of the U.S. Armed Forces here.

Disability and EITC

Some disability retirement benefits qualify as earned income to claim EITC. Also, you may claim a relative of any age who is totally and permanently disabled and fits all other eligibility requirements.

Claiming EITC after a Prior Disallowance

If IRS disallowed or reduced your earned income tax credit (EITC) for any year after 1996, you may need to complete an additional form, Form 8862 Information to Claim Earned Income Credit after Disallowance,  the next time you claim the credit. Click on the following links for the forms:

 

IRS can also impose a ban on claiming EITC. The IRS examiner tells you during the examination process and IRS also notifies you by mail about the bans. IRS can impose the following types of bans:

  • Two-year ban for reckless or intentional disregard of the EITC rules.
  • Ten-year ban for fraud.

 

To claim EITC after the ban period, you must file Form 8862 with their tax return. IRS will reject the EITC claim if the form is not present.

See Chapter 5 in Publication 596, Earned Income Credit, for more details on claiming EITC after a prior disallowance or ban.

 

Page Last Reviewed or Updated: 04-Jun-2014