How do I exempt military pay on a Michigan state return when spouses have different residency statuses?

[user17751385021]

TurboTax automatically exempts military pay it when both spouses are marked as full-year residents, but if I change the military spouse to part-year or non-resident, the exemption is no longer applied. I’ve tried everything—what am I missing?

[JamesG1]

In TurboTax, in the Michigan state income tax return, if both spouses are reported as full-year residents of Michigan, active duty military pay is exempt to Michigan.

If one spouse is reported as part-year resident of Michigan, active duty military pay is exempt to Michigan.

Under Personal Info or My Info, make sure that you correctly report for the spouse that they lived in another state and the dates that they lived in each state.

[user17751385021]

Yes, everything is entered correctly. If I mark both spouses as full year residents, the page "Deduction for Military Pay" comes up and confirms that the military pay was exempted. But if i change the non-military spouse to either part-year or non resident, this page never comes up and the military pay of the full-year resident  remains as taxable income. Is TurboTax able to handle this situation?

[DaveF1006]

1. Check the "Member of the Household" Logic

In the Personal Info (or My Info) section, ensure the military member is still marked as a Full-Year Resident of Michigan.

1.  Even if you are stationed elsewhere, for tax purposes, your "State of Legal Residence" remains Michigan. 
2. If you marked the military spouse as a "part-year" resident because you moved on orders, TurboTax may stop looking for the Michigan military exemption.
3. Keep the military spouse as a Full-Year Resident of Michigan (unless you actually changed your State of Legal Residency via DD Form 2058).

2. Manual Entry in the "Subtractions" Section

If the "Deduction for Military Pay" screen disappears during the automated interview, you have to find the manual entry point in the Michigan state interview:

1. Go to the State Taxes tab and start/edit Michigan. 
2. Look for a section titled "Subtractions from Income" or "Income and Adjustments."
3. Navigate to "Military Pay" or "Military Subtraction."
4. Even if the specific "Military Spouse" logic is acting up, you should see a line for "Active Duty Military Pay included in Federal AGI." 5. Enter your total active-duty pay here. This will flow to Michigan Schedule 1, Line 14, which is the official line for exempting that income.

@user17751385021 

[user17751385021]

Thank you for the answer, everything you explained is exactly what I’m trying to do, but it doesn’t seem to be possible in the online version.

The military pay subtraction does appear on the Michigan return under "Income/Military Pay Adjustment" section, but ONLY when both spouses are marked as full-year residents. As soon as I change the non–active-duty spouse to part-year or nonresident, that subtraction option disappears from the income section, even when keeping the military member as full-year.

The Premium Online version doesn’t allow direct form editing, so it seems like I can’t use this version, which is frustrating, since it’s the free option for military members.

[DaveF1006]

If you don't mind, I would like you to send me a sanitized copy of your return.  Sanitized means that all your personal information is omitted from the return, and all I receive are numbers. Here is how to send.

For TurboTax Online:

1. Go to Tax Tools > Tools.
2. Select Share my file with agent.
3. You will receive a token number.
4. Reply to this thread with the token number.

[user17751385021]

Token: 1351553

Military member is MI resident (full year)

Spouse is MI nonresident,  electing to use ME as residency for 2025 under MSRRA, where we moved to in 2025.

Thank you.

[DaveF1006]

I just reviewed your file. Open your Michigan tax return, and navigate to a screen called Michigan Wages. There you will see a federal amount and a Michigan amount. Put "0" for Michigan wages. 

Here is a link from michigan.gov that verifies that active military pay is excluded from Michigan income.  The only michigan income that should be taxable now is interest and dividends.

[user17751385021]

If I put 0 as reportable wages to MI, then the wages appear on the NR Schedule 1, line 5 under « Other State Income », but they should be listed as a Subtraction on the regular Schedule 1, Line 14 as military pay. So I don't feel putting them on the NR schedule is the correct way.  TurboTax is just not handling it correctly. When both are marked as full-year residents, then the wages get exempted on Schedule 1, Line 14 as they should.