You would file an Illinois nonresident state tax return to report the Illinois income. Texas does not have a personal income tax so there is no Texas state income tax return to file.
You will only file an IL non-resident tax return since TX does not tax personal income. Additionally, you do not qualify for MSRRA either, for that same reason. So the bottom line is, you will pay IL state taxes only on that income earned while working for an employer in that state. If your military spouse's home state is not IL, then no state taxes will be paid on his military income to any state.
I am confused on why I would not qualify for MSRRA.
Not only is my husband a resident in Texas, but I am as well. As far as legal paperwork goes, I am still a resident in Texas (from what I understand). I maintain my Texas driver's license, I am registered to vote in Texas, my vehicles are still registered in Texas, etc. Also, I have earned income in Texas for the past 8 years (including te beginning of this year).
With all of these things considered, should I not receive a tax return from IL for the taxes taken out of my paycheck since I am not legally a resident of Illinois? And although I know that I do not file a Texas State Tax return, since there is none, how do I prove my residency on my IL Tax Return?
Thanks for your help, just trying to understand everything!
You DO qualify for MSRRA. Section 302(B) of the new tax law says this: "For any taxable year of the marriage, the spouse of a servicemember may elect to use the same residence for purposes of taxation as the servicemember regardless of the date on which the marriage of the spouse and the servicemember occurred."
To obtain a refund of incorrectly withheld Illinois taxes, you must file a non-resident Illinois tax return, showing zero Illinois income.
You should also file Form IL-W-5-NR with your Illinois employer. Here's a link to that form: https://www2.illinois.gov/rev/forms/withholding/Documents/currentyear/il-w-5-nr.pdf
Filing that form will cause your employer to cease withholding Illinois taxes.