Members of the U.S. Armed Forces often are eligible for the Earned Income Tax Credit (EITC). Their eligibility may be affected by the new definition of earned income, effective beginning in tax year 2002.

The most significant change for military personnel involves the earned income calculation. The following items are no longer included when calculating earned income:

• Combat zone compensation
• Basic Allowance for Housing (BAH)
• Basic Allowance for Subsistence (BAS)

Because military personnel no longer include these nontaxable amounts in earned income, their earned income is lower and could make them eligible for the credit. For tax year 2003, the earned income limits for the EITC are:

• $33,692 with more than one qualifying child ($34,692 if married filing jointly),
• $29,666 with one qualifying child ($30,666 if married filing jointly), or
• $11,230 with no qualifying child ($12,230 if married filing jointly).

Additionally, military personnel stationed outside the United States on extended active duty are considered to live in the United States for the purposes of the EITC.

Individuals can figure the credit by using the appropriate worksheet in their IRS 1040, 1040A or 1040EZ tax packet. IRS Publication 3, Armed Forces' Tax Guide, provides tax information specifically for active members of the U.S. Armed Forces. In addition, military personnel can receive assistance with tax preparation and EITC claims from an installation's JAG office.

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