What is my state of residence as a military spouse?

by TurboTax•227• Updated 1 month ago

Active-duty service members have always been able to keep one state as their state of legal residency (usually their Home of Record) for tax purposes, even when they move frequently on military orders. A state of legal residence (SLR) is also considered their "domicile" or "resident" state.

Nonmilitary spouses can use their military spouse's resident state when filing their taxes. The Military Spouse Residency Relief Act (MSRRA) allows a nonmilitary spouse of a service member to keep the same resident state of the military spouse regardless of which state they live in. The Veterans Benefits and Transition Act allows that choice to be made regardless of when they were married.

Qualifying for the MSRRA

When the military family no longer lives in that resident state, to qualify under the MSRRA, all of the following conditions must be met:

The service member is stationed, in compliance with military orders, in a state that is not their resident state.
The nonmilitary spouse is in that state solely to live with the service member, and resides at the same address as the service member.
Both the service member and spouse have the same resident state.

When the nonmilitary spouse meets the above qualifications, their wages from services performed in that new state will only be taxed in their resident state, not by the state they are currently living in.

IMPORTANT: When living in a non-resident state, the spouse needs to check the state laws to determine if they need to declare their non-residency for withholding purposes. This may be required by their employer on an annual basis.

See Military Filing Information on State Websites and the example below.

When MSRRA is no longer applicable

MSRRA rules are no longer applicable if:

The service member leaves the service.
The couple divorces.
The service member moves to a new location where the spouse could join them, but chooses not to. If deployment is to a location where the spouse isn't allowed to follow, it doesn't affect their MSRRA eligibility.
The spouse clearly establishes the new state as a state of residence. This includes an action like applying to vote in that state.

Example on which state to file under

Person A lived in Georgia all their life until they joined the Army in Atlanta at age 18. No matter where they're stationed, every year they file a Georgia resident return and pay Georgia tax.

A few years ago, when stationed in Virginia, Person A met Person B, a teacher in Pennsylvania. They get married and Person B moves to Arlington, Virginia to live with Person A. Person B takes a job as a teacher. Under the Veterans Benefits and Transition Act of 2018, Person B will be able to claim Georgia as their resident state even though they've never lived there.

Note for Person B: They need to check the Virginia state website to see how to request that Virginia income tax not be withheld from their wages. Since they'll be paying Georgia taxes on their wages, they need to have Georgia income tax withheld from their paycheck. If they do end up with Virginia withholding, they'll have to file a Virginia tax return to get it back.

Note for Person A: If they work a nonmilitary job in Virginia, they may have to file a tax return and pay tax in Virginia. See Filing State Taxes When You're in the Military and Civilian Pay Earned by Active Duty Military for more details.

For more info on how a particular state handles MSRRA, check out Military Filing Information on State Websites.