My return is saying my wife and I still owe money to Hawaii despite being a non-resident with a military member. Shouldn't this amount be excluded from taxes?

[ishultzaberger]

My wife and I lived in Hawaii until May of 2017, and have now PCS'd to Maryland. Looking at the Hawaiian tax code, it says that spouses of military members are exempt from taxation. However, when I enter my wife's income information, my return is still telling me that I owe Hawaii money, and despite what changes I make, it doesn't change. Not sure what's going on here, especially since I am going to be taxed twice on this (Virginia state taxes.)

[DS30 · Accepted solution]

Regarding your active military duty information -

Just make sure that you are letting the TurboTax system know that you are on active military duty and that you are inputting your state of legal residency (SLR) as your resident state. Your SLR is usually your home of record – the state recorded by the military as your home when you joined the military (regardless of where you are stationed).

For example if your SLR is VA but you are stationed in HI then move to MD, then you will use VA as our resident state in TurboTax.

You may need to edit your personal information under the Personal Info tab (for TurboTax Online sign-in, click Here) to let the TurboTax system know that you are in the U.S. Armed Forces.

You will need to make sure that you select yes -"I am a member or former member of the U.S. Armed Forces (active, reserve or National Guard)".

Also answer "no" to "I lived in another state" (screenshot). Even though you may have lived in a different state, this will not apply if you are on active military service in a state other than your home of record state.

Additionally, if you earned any income outside your military pay in a state that is not your state of record, you will need to file a nonresident state income tax return to recognize this nonmilitary income. Otherwise you will only have a resident state income tax return for your home of record, the state where you lived when you joined the military.

Regarding your wife's wage income -

If she is covered under MSRRA, she will only file taxes in your state of legal residency (SLR).

In order to get the full refund of any HI state income tax withholdings, she will need to file a nonresident HI return but report zero "0" income from HI (even though she does have HI wage income). She must mail in this HI nonresident state income tax return and include her state W-2 information. She will want to include an explanatory statement with her HI return stating her situation (that her HI employer withheld HI state income taxes from her wages in error because she is a military spouse and covered under MSRRA).

You can add a state under the state taxes tab in TurboTax.

However, if she does not qualifies under the MSRRA and is claiming a non-HI state as her state of residence, then you can still file jointly for federal income tax but will need to file married filing separately for state taxes.

https://ttlc.intuit.com/replies/3301995

[ishultzaberger]

I did want to ask another question regarding this - she doesn't have any money listed as having been paid to HI for state taxes, only the federal taxes. Regarding this information, I still need to send the return form to Hawaii, correct?

[DS30]

If you and your spouse's home of record is not HI and if your spouse did not have any HI withholdings taken out for work done while stationed in HI, then no HI state income tax return needs to be filed.

If any HI withholdings were taken out for your spouse and your spouse qualifies under MSRRA, then you would need to file by mail and report "$0" HI income so your spouse can get the withholdings full refunded.