topic Recently retired army in Germany working for the DOD. Should I change my state tax withholding back to my HOR (state A) or leave it with my SLR (state B)? in Retirement tax questions

Recently retired army in Germany working for the DOD. Should I change my state tax withholding back to my HOR (state A) or leave it with my SLR (state B)?

kevin-higgins338 — Fri, 05 Dec 2025 06:52:19 GMT

I am currently in Germany and retired from the US Army on 01 Dec 25. On 03 dec 25 I began a new job as a contractor for the DOD in Germany. My HOR while on active duty was state A and about 1 year into my army career in 2004, I changed my SLR to state B. Now that I am no longer an active-duty service member should I change my state tax withholding back to state A or keep it with state B? To add I have no intentions of ever living in state A when I leave Germany.

Re: Recently retired army in Germany working for the DOD. Should I change my state tax withholdin...

SusanY1 — Thu, 11 Dec 2025 23:36:40 GMT

Most contractors are no longer bound by either a Home of Record (HOR) or State of Legal Residence (SLR). However, some states are "sticky" and you may still be considered a tax resident of your SLR. That depends, though, on which state that is.

You may also be eligible to exclude your income earned in Germany now that you are not on active duty, if you meet the criteria for the Foreign Earned Income Exclusion (FEIE). We have tips for taxpayers overseas HERE, which includes information on the FEIE.

For your state question, we may be able to offer additional guidance if you share which state was your SLR at retirement.