You do not have to report your nontaxable pay you receive as a member of the Armed Forces as earned income for EITC.

Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS).

The amount of your nontaxable combat pay is on your Form W-2, in box 12, with code Q.

But you and your spouse can each choose to have your nontaxable combat pay included in your earned income for EITC.

Including it as earned income may decrease the amount of tax you owe and may mean a larger refund.

You should calculate your taxes with the combat pay as earned income and without to find out what’s best for you.

If you make this election, you must include in earned income all nontaxable combat pay you received.

You cannot choose to include only a part of the nontaxable combat pay in earned income.

That is,

1. You can choose to include all your nontaxable combat pay and your spouse can choose zero,
2. You can choose to include zero amount of your nontaxable combat pay and your spouse can choose to include all of it,
3. You can both choose to include all your nontaxable combat pay,
4. You can both choose not to include your nontaxable combat pay.

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