For many of us, tax season comes with a sinking feeling. The incomprehensible forms, piles of documents to sort through, and the unwelcome prospect of writing a large check to the IRS leaves us with a splitting headache.
However, tax season does not have to bring bad news. In fact, some military families may find that they are eligible for an income tax credit that will allow them to keep more of the money they have earned, thanks to the Earned Income Tax Credit.
The Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate income families. To qualify, your taxable income must fall below a certain threshold. For 2012, a married couple with two children may qualify for the EITC if their earned income and their adjusted gross income are below $47,162. Remember that allowances, such as Basic Allowance for Housing (BAH) are tax-exempt. Combat pay is normally not taxable but you can elect to have it included in your Earned Income if doing so increases the amount of your credit.
Intimidated? Don’t be. There are plenty of resources to help military families tackle tax season. The most important thing to remember is that in order to qualify for the EITC you must file a tax return, even if you do not owe any tax or are not required to file. For more information about the EITC, check out the IRS online guide for families and individuals.
Do you think you might qualify for the EITC? What other tax tips do military families need to know?