Army Pay & Allowances, pay raises, pay allowances, pay charts - Army Times

Earned Income Tax Credit

The EITC helps offset Social Security and Medicare contributions from the lowest-income wage earners. The size of the credit and qualifying income thresholds change each year.

Lower-ranking and midlevel military parents may qualify for this tax credit, and even singles who spend most of a year in combat deployments could qualify.

For tax year 2006, the credit is worth up to $4,536 for low-income parents and guardians with two or more children, up to $2,747 for those with one child and up to $412 for those with no children.

In addition, those who expect to qualify for the Earned Income Tax Credit in the following tax year can apply for an advance payment of as much as $1,500.

Because most service members on lengthy deployments to combat zones do not pay taxes on their income, their taxable income may be low enough for a given tax year to qualify them for this credit.

Since 2002, only taxable income is considered. Along with untaxed military pay, contributions to the Thrift Savings Plan also would be ignored under the new IRS rules.

The Internal Revenue Service Web site has a page devoted to EITC information for service members, including income limits and a wealth of other details, at www.irs.gov/individuals/military/article/0,,id=118866,00.html.

Service members apply for the credit by filing an IRS Form W-5 with the Defense Finance and Accounting Service.