Active Duty Military: What state to file?

[mtlampley]

I'll try and explain the question as best as I can.

My Home of Record is Illinois, and I am stationed at Ft. Campbell, KY, while living in Tennessee. I have 2 vehicles registered in TN, and have a TN Driver's license. IL is what shows on my LES.

I have seen on various forums, posts, etc., that if your only source of income is military pay with HOR IL, that an individual does not have to file a state tax return. I have also need information that I believe contradicts it.

I am hoping someone point me in the right direction.

[KrisD15]

Home Of Record is not the same as State of Residence. 

Since you were a resident of Illinois when you joined the military, Illinois will always be your Home Of Record and Home Of Record has nothing to do with taxes; HOWEVER, unless you changed it, Illinois is also your State Of Residence. 

You can change your State Of Residence, but you need to let the military know what your new State Of Residence is, if it is no longer Illinois. Your State Of Residence is the state that you will file and pay taxes to going forward, no matter where your boots are. 

You may only choose ONE State Of Residence and that should be the state you consider your home state, the state in which you would be living if not for serving in the military. An indication of your State Of Residence would be the state in which you are registered to vote. 

Thank you for your service.

Below are two links with more information that I think you will find helpful: 

Click here for more information from TurboTax

Click here for more information from the DOD

[mtlampley]

Okay, that makes sense. If not for the military, I would be in Illinois (according to the Govt.) That being said, does that make me a resident or nonresident of Illinois?

[KrisD15]

You are a full-year resident of Illinois until you change your State Of Residence. 

[SteamTrain]

Ok, I'll try to summarize. 

With an HOR of IL, you are considered an IL resident, no matter where you are posted, unless you changed your State of Legal Residence (SLR) to another state (TN?) using a form DD2058, filed and accepted by your Military HR/personnel dept.  IF changed that way, your SLR takes precedence over your IL-HOR from that acceptance date forward.   

IF you have not prepared and filed a DD2058, then both your HOR and SLR remains IL and you would likely need to file an IL Resident tax return.  Having a TN Driver's Lisc. doesn't change that, but complicates filing an IL tax return "electronically", because the IL ID/Drivers Lisc is required to "E-file", and then you'd have to print and mail-file the IL tax return.

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Assuming for the moment, that no DD2058 was filed by you, and you are thus considered a full-year IL resident for tax purposes, you have to file an IL tax return 1)  if you are also required to file a Federal tax return (you probably are)  or 2) if your base IL income (line 9 of the IL-1040) ) is greater than the IL minimum for filing .

.....the thing is, since you are physically posted out-of-IL, you will get to subtract any  box 1 income on that military (edit) W-2, from your IL income (it uses Schedule M, but the IL interview should ask about that)....but any other income, interest dividends, investment income , is still subject to IL taxation.

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Then also...you haven't indicate if you are single or married, and if married is spouse civilian or in military too. That can get complicated....or not depending on the circumstances.

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IF you DID change your SLR to TN with a filed and accepted DD2058, then you would file part-year IL in the year of the change, and the first full tax year after that, would no longer be required to file in IL...as your SLR is now TN (even if your HOR remains IL)

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This official IL Publication can get messy had hard to navigate...but here's  IL Pub. 102 for Military personnel....I don't think it's well written.  Other states give examples to help explain exactly what they are talking about:

pub-102.pdf (illinois.gov)

[TomD8]

Your State of Legal Residence (your SLR) remains the same as when you entered service, unless you formally change it with DFAS by filing DD Form 2058.  Your military pay is taxable only by your SLR, regardless of where you are stationed.

Here are Illinois' tax instructions for military:

https://www2.illinois.gov/rev/research/publications/pubs/Documents/pub-102.pdf