Active duty military income earned outside of Pennsylvania by a PA resident is not subject to state income tax.
In TurboTax, to make sure the exemption goes through correctly on your PA return you need to first code your W-2 as active duty wages in the Federal portion and, second, mark your active duty wages as not taxable on the PA return. Here's how you do this:
Ensure military W-2 is indicated as active duty income:
- Once in your return, click on Federal Taxes tab and choose Wages & Income
- Click Edit next to your military W-2
- Click Continue on the W-2 entry screen to get to the screen titled "Do any of these uncommon situations apply to this W-2?
- Click the box to the left of Active duty military (see screen shot below)
You are considered a resident if your legal state of residence on your LES is PA. Only your military pay earned while stationed outside of PA is exempt from state taxes. All other income IS taxable by Pennsylvania and the state requires a return if your taxable income is greater than $33
In the state section of TurboTax, when you come to the page titled “Compensation Summary”, click edit beside your military income. The Verify This Income screen states that active duty military pay is not taxable in PA. Click box to left of Entire amount of this income is not taxable in PA. (*If you have already run through the PA return, when you get to this screen you may only see a box next to Make this income taxable in PA. - this box should NOT be checked.) (see screen shots below)
Note: Any interest, dividends, capital gains, rental income, etc. IS taxable by PA regardless of where you are stationed.
If you are filing electronically you must either fax or mail copies of your W-2 and military orders to:
Fax: 717-772-4193 or 717-787-2840
Use the Personal Income Tax Fax Cover Sheet DEX-93 to assist in timely posting of any information to your return.
PA Department of Revenue
Electronic Filing Section
P.O. Box 280507
Harrisburg, PA 17128-0507
Please make sure your Social Security number is on your orders.