Alerts for Special Situations

Military Personnel

Qualifying Child Residency Rules for Active Duty Military

To 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  

Generally, 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).

But, you and your spouse may 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 taxable disability retirement benefits received before minimum retirement age qualify as earned income for the EITC. Also, an individual of any age who is totally and permanently disabled may be a qualifying child for the EITC.

Claiming a Credit after a Prior Year Audit Disallowance

If the IRS disallowed or reduced your earned income tax credit (EITC) for any year after 1996, you may need to complete and send Form 8862, Information to Claim Earned Income Credit After Disallowance, (Form 8862SP en EspaƱol) with your tax return the next time you claim the credit. 

If the IRS disallowed or reduced your child tax credit (CTC)/additional child tax credit (ACTC) or your American opportunity tax credit (AOTC) for any year after 2015, you need to complete and send revised Form 8862,with your tax return the next time you claim the same credit.

The IRS can also impose a ban on claiming the EITC, the CTC/ACTC or the AOTC. The ban is explained to you during the examination process and after the audit when we send you a letter in the mail with additional information about the ban. The 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 the EITC, the CTC/ACTC or the AOTC after the ban period, you must complete and file Form 8862 with your tax return. The IRS will reject your return if the form is not included.

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: 17-Apr-2017