We filed 'Married filing joint' for our federal return. She is Active Duty Military, home of record is Maryland but is living in Virginia. I'm a Virginia Resident, workin in VA and paying VA taxes.
- Is she considered Resident or Non-resident when filing her state tax.
- Do we use the combined AGI from federal return for our separate state returns?
- On the state returns, do we put 'Married filing separate' since we have two separate states but filed jointly for federal?
The new MSRRA rules you can both claim his SLR for income tax purposes so you can file a joint MD return ONLY ... if you cannot get the employer to refund the VA taxes already withheld and stop the withholding then you can file a non resident return showing no VA income to get the unneeded withholding back.
If you claim MD residency for state tax purposes, your income from services performed in VA is not subject to VA taxation or withholding.
If you claim MD residency, you should file VA Form VA-4 with your employer, showing that you are exempt from VA withholding: https://www.tax.virginia.gov/sites/default/files/taxforms/withholding/any/va-4-any.pdf
You may obtain a refund of any incorrectly withheld VA taxes by filing VA Form 763-S: https://www.tax.virginia.gov/sites/default/files/taxforms/individual-income-tax/2018/763-s-2018.pdf
See this for full details: https://www.tax.virginia.gov/sites/default/files/inline-files/tb-19-2-military-spouse-veterans-benefits-transitions-act.pdf