Active duty military retired in 2024, started new job while on terminal leave

[ame12158]

Hello! My husband retired from the military on Oct 31st of this year. His HOR is CA. I forget what residency status we use for that but I think it's non resident or part year resident, but it ends up being where we pay no state taxes on his military pay to CA. He had 3 months of terminal leave to use up prior to his retirement and so he took that all right in the 3 months before retiring. During that leave, he started a new job as a civilian in August. We're confused on how to determine residency for the 2 states as we live in ID. The 3 month overlap is where we're confused. He was still a CA resident as he was still active duty but he also started paying taxes to ID with his new civilian job. He chose to become an ID resident as of Nov 1st, the first day of his retirement, where we own a home. How do we determine residency during the 3 month overlap? There was a section, I believe, that was asking how many days he was in CA and how many in ID. And at one piont during the state taxes, it was showing we owed them around $500ish and an underpayment penalty of $30ish to CA. We've never had to pay CA for anything. I did subtract his military pay from his total pay, when entering the income he earned in CA.  It also gives me a residency status for ID as nonresident and part year resident. Why would this be 2 different things? I did work a job for a couple of months and had ID taxes taken out and claim ID as my state of residency. When I click continue, the next page asks for his residency and then mine....I'm not sure what to enter for his: Part year resident or military nonresident? I enter full year for myself. Help! Thank you and sorry for all of the questions/confusion.

[SteamTrain]

You might need professional help for that.

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My non-legal take is that he remains locked as a CA resident (but filing as nonresident just for his military income) until his final release after the 3 Mos was up.  Thus, not really ID resident unless he submitted to military HR a DD2058 changing it to ID before his terminal leave was up.  Then Part-yr CA until that date, and Part-YR ID after the end of terminal leave.

Wrangling the rest of who owes whom for civilian income before those 3 mos. were up, might take a local pro to figure out.  I'd think it would be ID Non-resident income until the 3mos were up, then ID resident income after....and Might have to claim CA income too for those 3 mos.

BUT, Absent the DD2058 before the 3mos were up, that would mean he would not be an ID resident at all for 2024, and would file ID only as a non-resident for 2024.

But that's my take on it, and could be wrong.  Giant mess...get a local "experienced" pro to do it this year.  Yep, will cost more.

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Of course if he did file a DD2058 with the military, changing state to ID   BEFORE the 3 mos were  up, then he became a resident of ID as of the date the DD2058 was "accepted"/signed off by Military Authority.

[TomD8]

In what state was your husband stationed in 2024, prior to his retirement?  If he was stationed outside California, then his California tax status for 2024 would be non-resident, and he would be subject to CA income tax only if he had California-source income during that time. See Stationed outside California in Section D on page 5 of this CA tax publication:

https://www.ftb.ca.gov/forms/2023/2023-1032-publication.pdf

Some examples of "California-source" income would be income from a civilian job in California, or rental income from a property located in California.  His military pay is not California-sourced.

If his main, primary home after his retirement date was Idaho, then for 2024 tax purposes he would be considered a part-year resident of ID.  In that case all his income after his retirement date would be taxable by ID, unless specifically excluded by Idaho law.  Idaho does allow limited deductions for military retirement pay if you meet certain conditions.  You'll find the details here:

https://tax.idaho.gov/taxes/income-tax/individual-income/popular-credits-and-deductions/idaho-retire...