The only nontaxable military pay you can elect to include for Earned Income Credit purposes is combat pay. BAH and BAS are examples of nontaxable military pay, but they are never considered Earned Income, and you can't elect to include them. Please check that link. You can elect to include nontaxable combat pay. I know that page is confusing, but nontaxable combat pay, which is not considered earned income, is the only thing you can elect to include in earned income for the purposes of the EIC credit. There is nowhere it says you can elect to include nontaxable BAH or BAS as earned income.
From IRS Pub 596 - Nontaxable pay for members of the Armed Forces isn't considered earned income for the EIC. Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). See Pub. 3, Armed Forces Tax Guide, for more information.
.Combat pay. You can elect to include your nontaxable combat pay in earned income for the EIC. See Nontaxable combat pay in chapter 4.
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