topic Im a member of ky national guard so why would I owe any state taxes? in Get your taxes done using TurboTax

Im a member of ky national guard so why would I owe any state taxes?

kylest1 — Mon, 03 Jun 2019 18:53:07 GMT

It depends. You are correct that Kentucky does not tax a...

DanielV01 — Mon, 03 Jun 2019 18:53:08 GMT

It depends. You are correct that Kentucky does not tax active duty military pay, which includes National Guard pay. However, if you have income outside of the Guard, you are taxed on that income. If this is the case, it is possible that you are owing KY tax from that second job. However, there are a couple of entries to check to make sure that TurboTax is not including the Guard pay as income. First, note the following:

Sign in to TurboTax Online, click take me to my return, then pick up where I left off.
Click on Wages and Income, then Edit on your W-2
Double-check that no KY tax was withheld from your Guard pay.
Scroll through the screens until Do any of these uncommon situations apply? Make sure the Active Military Box is checked. Your KY military pay should be excluded from your state taxable income. (Screenshot below to assist you)

In addition, Kentucky gives an extra exemption to Guard members on the state tax return for other income they may have earned. Scroll through the Kentucky screens carefully and make sure to select that you are a member of the National Guard to receive that extra exemption.

If you have done both of these, you have done your best to reduce your KY tax liability. If you still owe KY taxes, it would be because a second job did not take out enough to cover the KY tax you owe.

Re: Im a member of ky national guard so why would I owe any state taxes?

Apetricek — Thu, 01 Apr 2021 17:56:47 GMT

Having same issue. When I remove the Military W2 the federal and state refunds change significantly. So it’s not bc of tax deficiency in other income.

Re: Im a member of ky national guard so why would I owe any state taxes?

DanielV01 — Thu, 01 Apr 2021 20:37:51 GMT

@Apetricek In this public forum we can't see your account to state specifically what you are seeing, but here's some possibilities:

Federal. All of your military income is taxable on the Federal return. However, when adding it you can possibly see an increase of your refund for a couple of different reasons. If your overall income is not that high, then taxes withheld from this income might be getting refunded back (or mostly refunded back). If you have children as dependents, the combination of child tax credit and earned income credit can also potentially increase your refund. One final possibility is that you could also receive more refund for stimulus payments that were not received last year, or you could qualify for other credits that is helping to increase your refund. Of course, if your refund went down, this is because of increased taxable income.

State of Kentucky. As I posted earlier, Kentucky does not tax active duty income. But that doesn't mean that active duty income doesn't affect the refund. Without the income, it is likely that your other income's tax was being refunded because of a credit in Kentucky called the Family Size Tax Credit. The Family Size Tax Credit is allowed when your income is considered low based on the size of your family (from 1 to up to 4 qualified family members). However, when the Active-Duty income is added on, then the credit can be reduced or eliminated. While the Active Duty income is not taxed, it does factor in for this credit. If, on the other hand, your refund increased, then there are two possibilities. The first is that KY state income tax was withheld from your active-duty income when it should not have been. The other possibility is that Kentucky does have a few exemption credits for members of the National Guard. (It is a small amount but nevertheless could increase your refund).

If none of these possibilities addresses what you see on your return, please feel free to comment and we might be able to give additional information.