Many people in the military are eligible for the earned income credit (EIC). Even if your regular income doesn’t qualify you to take the EIC, time spent in a tax-exempt combat zone can move a family’s income into EIC eligibility. Heck, even senior officers can be eligible for the EIC if they spend enough of the year in a combat zone.
I’ve recently learned about a small and irritating loophole to the Earned Income Credit, and it is a loophole that is poorly explained in the Earned Income Credit explanations.
One of the rules for being eligible for the earned income credit requires that your investment income be below a certain threshold. Now, to the average person, it might seem like “investment income” would include the income earned on ordinary investments: stocks, bonds, mutual funds, etc. However, that is not the case. It also includes a variety of other types of income, including rental real estate income.
So, if you have a rental property and make some money off that property, be sure to fill out that form properly and read all the little instructions to make sure that you calculate your eligibility correctly. Otherwise, you could find yourself not getting a credit you expected.
One more thing to worry about when someone is deployed. Great.