Reservist called to Active duty and PCS'ed to another state

[viperpitter]

Hello. I am a reservist that was called to Active duty from California to Hawaii, and my Home of Record is California. When we PCS'ed to Hawaii we sold our California home and are renting in Hawaii. Where things get complicated is I am on military leave from my civilian job in California and am still receiving a portion of my pay from that company. 

According to the California tax board webpage, "An individual domiciled in California when entering the military is considered a nonresident while stationed outside California on permanent change of station (PCS) orders. We tax nonresidents on California sourced income."

According to this website, I am a nonresident of California but will still be taxed for the money I earned from my civilian job. From this statements it is clear that I need to file a California return and that I will be taxed for the money my civilian job paid me when I was stationed in Hawaii. 

My question is this; my Military W2 has over 6K deducted for California state income tax, but according to the California tax board webpage I am considered a non resident while on PCS orders. Should I be paying this state tax? If not, how do I go about getting this state tax deduction back and do I need to file a Hawaii resident return?

[MaryK4]

The SCRA allows active-duty military members to maintain their legal residence in the place they consider home so you are for all practical purposes, a California resident.  California has the "file as a nonresident" rule so that if you are not stationed in California, you do not have to pay state income tax on the active duty pay.  However, because you are getting the employer supplement now you do file a California nonresident income tax return.  You still do not have to report the Active Duty pay as CA income, so you should get the withholdings refunded.  (And if you have not already done so, contact DFAS and request exemption from California withholding while you are stationed outside California.)

Because you are active duty, you are not required to file a Hawaii state income tax return unless you have Hawaii source income outside your active duty pay.

[viperpitter]

Thank you very much for your quick and thorough response! I have turbo tax deluxe for Mac. How do I go about getting the active duty pay CA withholding refunded? 

[DMarkM1]

You will file a CA non-resident return that excludes your active duty military pay from CA state taxes. 

1. Start in the "My Info" section 
2.  "Edit" your information. 
3.  Indicate you are/were military and answer the follow on military questions.  
4. Next indicate your resident state is CA and you did not live in any other states. 
5.  "Continue"
6. Scroll down to "Other state income"  "Edit"
7. Indicate you were stationed in HI
8. Answer "Yes" or "No" if you earned any other income in HI
9. "Continue"
10. Next "Revisit" the "W2" topic in the "Income" tab
11. "Edit" your Military W2
12. After the form entry pages you will see a follow on page for "Special Situations"
13. Indicate "Active duty Pay" on that page
14. Revisit and continue your CA state interview.
15. "Update" the "General Info" section
16. You will be asked residency questions concerning your military status
17. Ultimately TurboTax will select non-resident CA for you
18. Your CA tax liability will be adjusted accordingly