Which statement about the Earned Income Tax Credit is false?

The statement regarding the inclusion of nontaxable combat pay in earned income is incorrect. For the purposes of calculating the Earned Income Tax Credit (EITC), nontaxable combat pay is not included in earned income. Taxpayers can choose to include their nontaxable combat pay when calculating their earned income for the credit, but it is not a requirement and is typically excluded by default.

This means that individuals receiving nontaxable combat pay can optimize their EITC benefits by choosing whether or not to include that income in their earned income calculation, thereby potentially increasing their eligibility if it helps them meet the necessary thresholds.

Understanding how different types of income impact eligibility for credits like the EITC is crucial, especially when differentiating between taxable and nontaxable income.