I am military, my home of record is Virginia, my spouses residence is Texas, but we were stationed in NC and she made money there. It’s saying file separately, why?

[christophercastellano19]

When we file separately we lose about 6k, and we also lose a lot of credit but filing jointly we get more credit and refunds. Why can’t I file my state taxes as usual and her files hers? Why is it saying we have to file separately

[SteamTrain]

@christophercastellano19 

Your post is confusing as to whether your spouse is still in TX, or came to NC with you

and....is she a civilian? or also in the military herself?

and........worked there?  does that mean TX or NC, or both?

and, if in NC with you, is she declaring VA residency under MSRRA?

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You should read the following two articles:

What is my state of residence as a military spouse?

and

What is my military state of residence?

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OR get local help filing using a NC-Base tax preparation service that may be more cognizant of Military filing issues for this year, to help you clarify how taxes are to be filed in your situation

[christophercastellano19]

I got military orders to PCS to Texas. My spouse is still a Texas resident and always has been, but when we were stationed in NC she was working. When we go file state taxes it’s saying we have to file separately because VA is my home of record but I don’t live there I only paid taxes to the state itself out of my paycheck. My spouse is a civilian. How would she declare VA under MSRRA? @SteamTrain 

[SteamTrain · Accepted solution]

How to set VA as her residence state under MSRRA?

Well, from what I can see you/she just file your Federal and VA taxes as MFJ.  Then you/she are locked together, but all her/your income can be taxed according to VA tax rules.  If you were first married during 2024, I don't know if her TX income from before your marriage can be eliminated as being a part-year VA resident or not. ....detail a local professional tax preparer on your base may be able to clarify.

Certainly, if she works in NC, for her employer, she would need to indicate on the state withholding form (NC-4EZ) that she is exempt from NC taxation using a line 4 checkbox & a year entry between lines 5 and 6 of that form, in particular.

In some cases, a nation-wide employer can withhold VA taxes instead, but usually, a local employer would not be able to do so...a talk with that employer would clarify what they could/could not do.

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The civilian spouse of a military person, can retain her original residency (TX in her case), only if she remains in TX, or if you-yourself (the military person) has TX Residency/HOR/SLR.  (SLR= State of Legal Residence)

But, your own residency/HOR/SLR is locked in as VA unless you change your SLR, to the state you are currently PCS'd to, with filing a DD2058,  and satisfying all the requirements to make your posted state your SLR state.

The point of yourself always being locked as VA (without having gone down the form DD2058 route) is that it is intended to simplify state taxes for millions of Military people, so that they only have to file for their home state.  Otherwise, they would be forced to file part-year taxes for two states every time they were posted to a new state.   Thus, you-yourself only have to file VA taxes (unless you work a civilian job in some other state while off-duty).

IF the civilian spouse does not declare your state (VA ) as her Residency state under MSRRA,  then every time you move together, to your new PCS state, she would have to file part-year taxes for the former, and new state (if she works in both), and also she would usually have to get a new Driver's license, register to vote etc, according to the rules of the New state you PCS to.

But the details of all that, and how it helps, or hurts you? ....you should probably talk to Post legal services, or perhaps some long-term more senior military staff about what that is all about.

A close read of the links I gave you is a good starting point.

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As to the part about filing MFS tax returns.....if the civilian spouse is not declaring VA residency under MSRRA...then you can file MFJ Joint Federal, but would have to file VA MFS for yourself, in order to not have any of her working income taxed by VA.  But if you do that, then any working income she has while in NC will require her to file an NC MFS tax return too.

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From the VA filing instructions (my underline):

"Filing Status 3 - Married, Filing a Separate Return: If you and your spouse filed separate federal returns, you may use this filing status. If you and your spouse filed a joint federal return, but only one of you is a Virginia resident, the resident must use Filing Status 3. When using Filing Status 3, complete your tax return as follows: (1) Compute your federal adjusted gross income as though you had filed separately on your federal return; (2) claim only the personal and dependent exemptions, itemized deductions (if claimed on your federal return), and child and dependent care expense amounts that you could claim if you had filed a separate federal return. If one spouse claimed itemized deductions, the other spouse must also. (3) Be sure to provide your spouse's name and social security number in the spaces included on the return for that information."

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Post legal services may be more qualified to give advice to you on the options for the two of you.  And, perhaps talk to some long-serving married staff in your unit about it as a starting point.  And also, again, make a close read of the links I gave you in my initial post.