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Can Illinois tax my wife's military pay when she claims residency in Ohio?

We are both stationed overseas at the moment. I claim residency in IL and they have the military pay exclusion.  When turbo tax asks about the military pay exclusion can I add in my wife's military wages as part of that exclusion even though she claims residency in OH? Or is it because that since she claims OH,  IL taxes her wages?
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Can Illinois tax my wife's military pay when she claims residency in Ohio?

No, IL cannot tax your wife's military pay. 

She will have to file an OH tax return, but --- OH also excludes military pay from state tax when stationed outside the state (see below).

If your HOR is IL, her HOR is OH and both of you are active military, here is what you need to know and do.

Active-duty military are considered to live in their state HOR no matter where they are stationed. Their active-duty pay is considered to be earned in their state HOR. 

When you complete the My Info Personal Interview:

  1. You will select Illinois as your state of residence, and your wife will select Ohio as her state of residence;
  2. Both of you will answer "No" when asked if you "Lived in another state in 2017?" That question only applies if you changed your state of residence in 2017.
  3. When asked if you "Earned money in another state?", answer "No" (unless on or both of you had non-military income where you are stationed).

The program should guide you on how to file state returns. 

You will have to file an IL tax return and your wife will have to file an OH tax return. You may be able to file joint state returns - your IL return would include her as a non-resident  and her OH return would include you as a non-resident. Otherwise, you may have to file a joint federal return and separate state returns. Update this post with a comment if you run into any problems.

From the OH DOR website - "Law Change for Taxable Years 2007 and Forward: You and all other service members, however, are affected by a change in law for taxable years beginning on and after Jan. 1, 2007. This law allows for the deduction of your military pay you receive for active duty service while you are stationed outside the state (see Resident Service Members Stationed Outside the State, below) if the military pay is included in your federal adjusted gross income. See division (A)(24) of Ohio Revised Code 5747.01. You must still file an Ohio individual income tax return in order to qualify for the deduction.

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Level 1

Can Illinois tax my wife's military pay when she claims residency in Ohio?

No, IL cannot tax your wife's military pay. 

She will have to file an OH tax return, but --- OH also excludes military pay from state tax when stationed outside the state (see below).

If your HOR is IL, her HOR is OH and both of you are active military, here is what you need to know and do.

Active-duty military are considered to live in their state HOR no matter where they are stationed. Their active-duty pay is considered to be earned in their state HOR. 

When you complete the My Info Personal Interview:

  1. You will select Illinois as your state of residence, and your wife will select Ohio as her state of residence;
  2. Both of you will answer "No" when asked if you "Lived in another state in 2017?" That question only applies if you changed your state of residence in 2017.
  3. When asked if you "Earned money in another state?", answer "No" (unless on or both of you had non-military income where you are stationed).

The program should guide you on how to file state returns. 

You will have to file an IL tax return and your wife will have to file an OH tax return. You may be able to file joint state returns - your IL return would include her as a non-resident  and her OH return would include you as a non-resident. Otherwise, you may have to file a joint federal return and separate state returns. Update this post with a comment if you run into any problems.

From the OH DOR website - "Law Change for Taxable Years 2007 and Forward: You and all other service members, however, are affected by a change in law for taxable years beginning on and after Jan. 1, 2007. This law allows for the deduction of your military pay you receive for active duty service while you are stationed outside the state (see Resident Service Members Stationed Outside the State, below) if the military pay is included in your federal adjusted gross income. See division (A)(24) of Ohio Revised Code 5747.01. You must still file an Ohio individual income tax return in order to qualify for the deduction.