My husband is a Reservist who lived in MT and SC, has a HOR of Ohio, but drilled in Michigan. I'm filing OH return for him, but would the neighboring compensation apply?

[victoria-butler]

His only income was from being a Reservist, so he only has one W2. His home of record is OH, so OH state tax was withheld. However, he drilled in Michigan, which logically seems like it would be compensation earned in a neighboring state. Thoughts?

[Hal_Al]

What do you mean by lived in "MT and SC" and HOR of OH?
The reciprocal state rules apply only to full year OH residents. But, that's academic. Since it's military pay, even reserve duty, it's only taxable by his SLR (HOR).

[victoria-butler]

So we lived in Montana for school part of 2018, and then moved to South Carolina for my work. His state of residency is Ohio, and his only income was from being a Marine Reservist. So I'm filling his state tax return as a nonresident Ohio (Ohio taxes were withheld but we never lived there in 2018). However, all of his income was earned in Michigan where he was drilling. So there was a question about earning an income in a neighboring state to Ohio, and I wasn't sure if our situation counted in this category.

[Hal_Al]

As an aside, how to you drill in MI from MT & SC?  Don't you ask for a transfer to a closer unit?

[victoria-butler]

Due to his MOS, there was a unit in MI that had an opening for him and that was the closest one to us in MT. And we just stayed with that unit when we moved to SC to finish his tour.

[Hal_Al · Accepted solution]

 As a reservist, he has no HOR/SLR (except for his duty time MI)  Being away at school is a temporary absence, so that time counts as living in OH (assuming you lived in OH prior to going to MT).

You and he have to file as part year residents of both SC & OH. He does not have to file a MI return.