Question: Diego is an active-duty military member stationed in Germany since last March. His spouse and children (ages 3 and 6) remained in Florida in the home they own together. This is Diego’s first deployment, and his spouse is not sure what filing status to use since Diego has not lived in their home for the last 10 months.
The couple does not want to lose any credits they could be eligible for but are concerned because Box 1 of Diego’s Form W-2, Wage and Tax Statement, only shows $8,000 even though he is employed by the military full time and received other nontaxable pay. The couple’s only other source of income comes from the small business Diego’s spouse owns, which nets $19,000 annually after expenses. Neither Diego nor his spouse attend school currently, but they do have eligible childcare expenses for both children. They are not separated and do maintain their home equally. Which filing status is more beneficial for Diego and his family?
Answer: Married filing jointly is the correct filing status to ensure that Diego and his spouse can claim all the credits they are eligible for, such as the child and dependent care credit. In this case, even though Diego has been out of the home the last six months of the year, his spouse does not qualify for head of household filing status since they maintained the household together. The married filing separately filing status would not benefit the couple because they would not be able to claim certain credits.
Diego and his spouse would also qualify for the earned income credit (EIC) based on their combined adjusted gross income (AGI) of $27,000. For tax year 2024, $62,688 is the maximum AGI eligible for couples filing jointly to claim EIC with two children. Box 1 of Diego’s Form W-2 is smaller than the total pay he received for the year because his taxable income does not include special pay allowances. Those amounts will be listed in Box 12 and can be found on his military leave and earnings statement as well.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.