Armed Forces News

As many as 10,000 service members who received combat-zone tax exclusions last year found their net family income drop because the exclusions disqualified them for Earned Income Tax Credit. EITC pays cash tax credits up to $4,204 to lower income families. Combat-zone tax exclusions, however, lowered service members’ taxable income, which resulted in eliminating the tax credits for many. Those affected were generally junior enlisted members or officers who had served seven months or more in combat zones during the tax year, were married with children and had little or no outside income. Charles S. Abell, principal DoD deputy for personnel and readiness, tried to fix the problem with a legislative proposal but the White House Office of Management and Budget pigeonholed it. Defense officials now are looking for a way to offset the revenue loss that would occur if the Catch-22 were eliminated.