What this line means
Nontaxable combat zone pay that you are electing to include as earned income for purposes of the Earned Income Credit. Military members serving in a combat zone can exclude their combat pay from taxable income, but that exclusion can reduce their earned income and shrink or eliminate their EIC. This line lets you add it back so the EIC calculation uses a higher income figure.
Does this apply to you?
- You served in a designated combat zone during 2025 and received nontaxable combat pay
- You are an enlisted member or warrant officer whose combat pay was excluded from your W-2 Box 1
- You want to increase your Earned Income Credit by including your combat pay as earned income
- Your spouse served in a combat zone and you are filing jointly
Easy to overlook
This is an election, not a requirement You choose whether to include nontaxable combat pay for EIC purposes. Run the numbers both ways — with and without the combat pay — because in some cases including it raises your earned income past the EIC phase-out threshold, actually reducing your credit. The optimal choice depends on your total income and family size. 1 IRS Publication 3 — Armed Forces’ Tax Guide
The election applies to all combat pay or none You cannot include only a portion of your nontaxable combat pay. It is all or nothing. If you make the election, every dollar of nontaxable combat pay counts as earned income for EIC purposes. This matters when you are right at a phase-out boundary. 2 General filing pattern — missed combat pay EIC election
Watch out for this
Not knowing the election exists. Many service members and their tax preparers are unaware that combat pay can be voluntarily included for EIC purposes. The default — excluding combat pay from earned income — is often the worse option for lower-income enlisted members with children who would qualify for a large EIC.
Footnotes
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IRS Publication 3, Armed Forces’ Tax Guide. https://www.irs.gov/pub/irs-pdf/p3.pdf ↩
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IRS Form 1040 Instructions. See also IRS Publication 17, Your Federal Income Tax. https://www.irs.gov/pub/irs-pdf/p17.pdf ↩