Is Non-Combat Pay includable for Earned Income Credit in 2007?
The IRS is allowing taxpayers to elect to have their nontaxable combat pay included in earned income when you figure your earned income credit for 2007.
The IRS had originally intended to have this election expire at end of 2006. However, IRS has decided to extend this election through Tax Year 2007.
For more information and discussion about the election, please refer to Publication 596.