Page 389 - Individual Forms & Instructions Guide

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
choose to include these amounts in earned income, in Because making the election will increase their EIC, they
which case enter -0-. For more information about these elect to add the nontaxable combat pay to their earned in-
payments, see Pub. 525. come for the EIC. They enter $3,584 on line 27 and they
If you and your spouse both received Medicaid enter $10,000 on line 1i of their Form 1040.
TIP waiver payments during the year, you and your Example 2—Election doesn't increase the EIC.
spouse can make different choices about includ- The facts are the same as in Example 1, except G had
ing the full amount of your payments in earned income. nontaxable combat pay of $30,000. When G and J add
Enter only the amount of Medicaid waiver payments that their nontaxable combat pay to their earned income, they
you or your spouse, if filing a joint return, do not want to find their credit to be $1,771. Because the credit they can
include in earned income. To include all nontaxable Med- get if they don't add the nontaxable combat pay to their
icaid waver payment amounts in earned income, enter -0-. earned income is $2,389, they decide not to make the

Nontaxable combat pay. You can elect to include election. They enter $2,389 on line 27 of their Form 1040.
your nontaxable combat pay in earned income for the EIC.
If you make the election, you must include in earned in- IRS Will Figure the EIC for You
come all nontaxable combat pay you received.
If you are filing a joint return and both you and your
spouse received nontaxable combat pay, you can each The IRS will figure your EIC for you if you follow the in-
make your own election. In other words, if one of you structions in Figure B.
makes the election, the other one can also make it but Please don't ask the IRS to figure your EIC unless
doesn't have to. ! you are eligible for it. To be eligible, you must
The amount of your nontaxable combat pay should be meet Rule 15 in this chapter as well as the rules in
CAUTION
shown on your Form W-2 in box 12 with code Q. chapter 1 and either chapter 2 or chapter 3, whichever ap-
Electing to include nontaxable combat pay in earned in- plies to you. If your credit was reduced or disallowed for
come may increase or decrease your EIC. Figure the any year after 1996, the rules in chapter 5 may apply as
credit with and without your nontaxable combat pay be- well.
fore making the election. Whether the election increases
or decreases your EIC depends on your total earned in-
come, filing status, and number of qualifying children. If
your earned income without your combat pay is less than How To Figure the EIC Yourself
the amount shown below for your number of children, you
may benefit from electing to include your nontaxable com- To figure the EIC yourself, use the EIC Worksheet in the
bat pay in earned income and you should figure the credit Instructions for Form 1040. If you have a qualifying child,
both ways. If your earned income without your combat pay complete Schedule EIC (discussed later in this chapter)
is equal to or more than these amounts, you will not bene- and attach it to your tax return.
fit from including your combat pay in your earned income. If you want the IRS to figure your EIC for you, see IRS

• $7,300 if you have no children who have a valid SSN. Will Figure the EIC for You, earlier.
• $10,900 if you have one child who has a valid SSN.
• $15,400 if you have two or more children who have Special Instructions—EIC
valid SSNs. Worksheets
If you elect to use your nontaxable combat pay in You will need to decide whether to use EIC Worksheet A
! figuring your EIC, enter that amount on Form or EIC Worksheet B to figure the amount of your EIC. This
CAUTION 1040 or 1040-SR, line 1i. section explains how to use these worksheets and how to
The following examples illustrate the effect of including report the EIC on your return.
nontaxable combat pay in earned income for the EIC.
EIC Worksheet A. Use EIC Worksheet A if you weren’t
Example 1—Election increases the EIC. G and J self-employed at any time in 2022 and aren't a member of
are married and will file a joint return. They have one qual- the clergy, a church employee who files Schedule SE, or a
ifying child. G was in the military and earned $15,000 statutory employee filing Schedule C.
($5,000 taxable wages + $10,000 nontaxable combat
pay). J worked part of the year and earned $2,000. Their EIC Worksheet B. Use EIC Worksheet B if you were
taxable earned income and AGI are $7,000. G and J qual- self-employed at any time in 2022 or are a member of the
ify for the EIC and fill out the EIC Worksheet and Sched- clergy, a church employee who files Schedule SE, or a
ule EIC. statutory employee filing Schedule C. If any of the follow-
When they complete the EIC Worksheet without adding ing situations apply to you, read the paragraph and then
the nontaxable combat pay to their earned income, they complete EIC Worksheet B.
find their credit to be $2,389. When they complete the EIC Net earnings from self-employment of $400 or
Worksheet with the nontaxable combat pay added to their more. If your net earnings from self-employment are
earned income, they find their credit to be $3,584. $400 or more, be sure to correctly fill out Schedule SE

Chapter 4 Figuring and Claiming the EIC Page 19