The Earned Income Tax Credit (EITC) has been a part of the tax code, in one form or the other, since 1975. According to the IRS the EITC exists, “in part to offset the burden of social security taxes and to provide an incentive to work.” Because of the numerous changes to the ETIC, the credit can be rather confusing and at times not even claimed. This is especially true of military members who deploy to combat zones. If members returning from a combat deployment are not careful preparing their taxes, they could miss the tax savings this credit provides. To help you understand the credit better I’ll outline the basics of the credit and how combat pay interacts with the credit. What is the Earned Income Tax Credit?  As mentioned above the purpose of the EITC is to offset social security taxes and provide an incentive to work for those who are low to moderate income. I know, you’re in the military already…you have an incentive to work. So, for most folks reading this article the EITC can help offset social security taxes. And this leads to an important attribute of the credit. It is refundable. What that means is that you can potentially get more from the credit than you owe/paid in taxes. For example if your tax return showed that you should get a refund of $1,000 before the EITC and you qualify for a $1,000 EITC you will receive a total refund of $2,000 even though you may have … Continue reading Combat Pay and the Earned Income Tax Credit