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Tax credit help for military families

By Kay Bell ·
Friday, July 5, 2013
Posted: 10 am ET

There's still hope on Capitol Hill that tax reform will be considered this year. The top tax writers in the Senate are proposing starting mostly from scratch, doing away with tax breaks unless a compelling case can be made to keep them.

One tax break that a lot of lawmakers would like to see go is the Earned Income Tax Credit, or EITC. This refundable credit, meaning a person could use it to get a tax refund, was enacted in 1975 as a way to help lower-paid workers.

To collect, a taxpayer must earn some -- but not too much -- money, and those with children qualify for a larger credit.

But the EITC is complicated, confusing and often illegally claimed. The fraud component is the main reason that many would like to see the EITC stricken from the tax code.

When it works, though, it works well.

Many in military depend on credits

And a recent study by the Center on Budget and Policy Priorities says that the EITC, along with the refundable portion of the child tax credit, are key to helping U.S. military families make ends meet.

About 1 in 4 current or former armed forces families with children, or 1.5 million military families, claims one of these tax credits each year. In tax year 2011, the Center found that on average the families received about $1,000 each from the child tax credit and $2,650 from the EITC.

Together, the EITC and CTC prevent more than 140,000 military families -- which include nearly 300,000 children and 600,000 total family members -- from falling below the federal poverty line, according to the study.

As you might expect, the most populous states are also the ones with the most military families benefiting from these two tax credits. Texas, California and Florida each are home to more than 100,000 military families receiving the credits.

Only around 3,000 armed forces families claim the benefits in the smaller states of Wyoming, Rhode Island and Vermont.

Credit qualifications

In 2013, a married couple with two children may qualify for the EITC if they make less than $48,378. A family may qualify for the low-income portion of the child tax credit if it makes less than about $47,000.

The Center on Budget and Policy Priorities based its military tax credit numbers on data from the Internal Revenue Service and the Census Bureau.

But the report's author, Arloc Sherman, says the Center's estimates are, in some respects, low.

"They leave out some military families that we could not reliably identify from the Census data, such as families with a member of the armed forces who is serving overseas or stationed in barracks and therefore is not covered in the survey," Sherman writes in the survey report's footnotes.

Have you or a family member ever claimed the EITC or refundable portion of the child tax credit?


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Veteran contributing editor Kay Bell is the author of the book "The  Truth  About Paying Fewer Taxes" and a co-author of the e-book "Future  Millionaires' Guidebook."

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tax appeals
February 01, 2014 at 7:52 am

The problem is that regular taxpayers, like you, are missing out on legal and safe deductions, to the tune of hundreds of millions of dollars in unclaimed refunds every year! As a tax professional, it truly breaks my heart, knowing that just a few thousand, or even a few hundred bucks for us “regular guys” out of that vast pool of overcharging could make a world of difference--and they are just sitting there, unclaimed! And with the economy we're facing's essential that the "right" professional handles your taxes, books, or other financial matters.