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. For more information, see Filing State Income Taxes When You're in the Military.
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.
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.
- 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.
MSRRA rules are no longer applicable if: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 is not allowed to follow, it does not 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.
Joe lived in Georgia all of his life until he’s 18 and joins the Army in Atlanta. No matter where he is stationed, every year he files a Georgia resident return and pays Georgia tax.
A few years ago, when stationed in Virginia, he meets Mary, a teacher in Pennsylvania. They get married and Mary moves to Arlington, Virginia to live with Joe. She takes a job as a teacher. Under the Veterans Benefits and Transition Act of 2018, Mary will be able to claim Georgia as her resident state even though she has never lived there.
Note for Mary: She needs to check the Virginia state website to see how to request that Virginia income tax not be withheld from her wages. Since she will be paying Georgia taxes on her wages, she needs to have Georgia income tax withheld from her paycheck. If she does end up with Virginia withholding, she will have to file a Virginia tax return to get it back.
Note for Joe: If Joe works a nonmilitary job in Virginia, he 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 information on how a particular state handles MSRRA, check out Military Filing Information on State Websites.