Tax help for military filers

I'm not sure exactly what you are seeing.

If her W-2 income is being properly tagged as Non-NC Income during the NC interview, then it is likely being excluded.

BUT

You should note, that when filing MFJ-NC (where one spouse is tagged as not an NC resident) the NC tax return does use all of both your incomes ....Just at First...calculates a Taxable income based on both your incomes, but then ratios the taxable income down based on what lower fractional amount of the total was just yours.

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Here's the big thing that can be an error on your part:  In the NC interview, on the page after the W-2 allocation page, there is a column that shows all the Federal income, and then a column where you enter NC income while Non-Resident.  Since your spouse is maintaining herself as a CA resident...That second column is for $$ for your NC non-resident spouse...and she had zero NC income as a NC nonresident....i.e. she didn't have any income subject to NC taxes...so in that column you should be entering all zeros for her...and zeroes must be entered & not left blank.

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To see that, it works out right, after you've fully filled in everything, you'd need to see the actual form D-400, where line 12b will be your non-reduced total taxable income for both of you, the line 13 is a decimal fraction of the total that belongs to you, Line 14 is just the taxable income assigned to you, and line 15 is the lower tax associated with just you.

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