If she is covered under MSRRA, she will only file taxes in your state of legal
residency (SLR). So you should not have to file a HI state income tax return if you are stationed in HI. Since TX has no state income taxes, then she will not have a state income tax filing requirement (unless HI withheld taxes from her wages (see below)).
Regarding your active military duty information -
Just make sure that you are letting the TurboTax
system know that you are on active military duty and that you are inputting
your state of legal residency (SLR) as your resident state. Your SLR is usually your home of record – the state recorded by the military as
your home when you joined the military (regardless of where you are stationed).
For example if your SLR is TX
but you are stationed in HI, then you will use TX as our resident state in
TurboTax.
You may need to edit your personal information under the
Personal Info tab (for TurboTax Online sign-in, click Here) to
let the TurboTax system know that you are in the U.S. Armed Forces.
You
will need to make sure that you select yes -"I am a member or former
member of the U.S. Armed Forces (active, reserve or National Guard)".
Also
answer "no" to "I lived in another state" (screenshot).
Even though you may have lived in a different state, this will not apply if you
are on active military service in a state other than your home of record state.
Additionally,
if you earned any income outside your military pay in a state that is not your
state of record, you will need to file a nonresident state income tax return to
recognize this nonmilitary income. Otherwise you will only have a resident
state income tax return for your home of record, the state where you lived when
you joined the military.
Regarding your wife's VA wage income -
If she is covered under MSRRA, she will only file taxes in your state of legal
residency (SLR).
In
order to get the full refund of her HI state income tax withholdings, she will
need to file a nonresident HI return but report zero "0" income from
HI (even though she does have HI wage income). She must mail in this HI
nonresident state income tax return and include her state W-2 information. She
will want to include an explanatory statement with her HI return stating her
situation (that her HI employer withheld HI state income taxes from her wages
in error because she is a military spouse and covered under MSRRA).
You
can add a state under the state taxes tab in TurboTax.
