Virginia State military basic pay subtraction

[peter85]

Hi,

If a military member (active duty for more than 90+ days, code 38 on VA form 760) has a basic pay of over $30k, but then contributes to the traditional TSP such that their box 1 w2 income is below $30k, are they eligible for this subtraction?  Last year turbotax seemed to thing the answer was yes, and did this automatically for us (without asking us).  This year it seems to have decided that the answer is no, and isn't applying it.  Which one is correct, and if the latter, do we need to amend last year's state return, and will turbotax pay the penalties and interest since it's the program's doing?

[DMarkM1]

It appears you would qualify for the subtraction.  According to the instructions for the VA Form 760, "This subtraction is allowed for military basic pay that is included in federal adjusted gross income and is not included in another subtraction, such as the Virginia National Guard Income Subtraction. 

Remember the subtraction is reduced by $1 for each $1 over 15,000.  So if you have 29,000 of military basic pay (box 1) then the subtraction total will be $1000 from income.  That is what creates the $30,000 limit. 

If the military basic pay does not exceed $15,000, then the entire amount may be subtracted. If the basic military pay is over $15,000, then the subtraction is reduced by the amount exceeding $15,000. For every $1.00 of income over $15,000, the maximum subtraction is reduced by $1.00. If your basic military pay is $30,000 or more, you are not entitled to a subtraction.

[peter85]

Hi @DMarkM1,

Thanks for responding! If I do qualify, why is Turbotax not applying it this year like it did last year?  The numbers are almost identical to last year...I understand how it phases out and that is not what's happening here.  Last year part of the state interview confirmed that we were active duty 90+ days and applied the subtraction.  This year, there are no other potential subtractions listed under Military besides the National Guard subtraction. It definitely knows we're military based on other questions in other parts of the program. When I view the forms at the end, there is nothing listed in line 7 of the VA760 like there should be if we qualify.  I've gone through the entire state section twice now looking for any questions that even seem to be resembling this.  Am I missing it somewhere?

[DMarkM1 · Accepted solution]

On the page entitled "Here's the income that Virginia handles differently, you could actually do the math and make the subtraction yourself under the "Miscellaneous" section using the "Other Subtractions..." topic.   

However, in my TurboTax online product the military w2 income, if under 30,000, does show in the Virginia interview asking if active duty was over 90 days for the deduction.  

Try deleting the W2 from the federal interview and then sign out of your TurboTax account and clear your browser Cache.  

Sign back in and re-enter the W2.  Be sure that you answer the follow on question that the W2 is for "Active Duty" pay.  

Additionally, be sure in the "Personal Info" section you have selected that you are "Military".

Then re-visit the VA state interview. 

[peter85]

That triggered it! When I initially input the w2, I had missed checking the box marking it as Active Duty pay.  Odd that TT let me check out with the military discount without that!

Thanks for your help Mark.