Military Spouses and State Taxes
Active duty service members have always been able to keep one state as their state of legal residency (usually their Home of Record) for tax purposes even when they move frequently on military orders. A state of legal residence (SLR) is also considered their “domicile” or “resident” state. For more information, see Filing State Income Taxes When You're in the Military.
This was not so for the nonmilitary spouse until the Military Spouse Residency Relief Act (MSRRA) was signed in 2009. Since then, a nonmilitary spouse of a service member may be able to keep the same resident state of the military spouse regardless of which state they live in.
For more information on how a particular state handles MSRRA, check out Military Filing Information on State Websites.
A nonmilitary spouse cannot just choose the service member’s state or “inherit” or “adopt” that state upon marriage.
At a minimum, the spouse must have lived in that service member’s resident state before “claiming” it as their own resident state for MSRRA qualifications. The spouse must also be able to prove residency by being registered to vote, maintaining a driver’s license, and any other residency requirements of that state.
When the military family no longer lives in that resident state, to qualify under the MSRRA, the following conditions must be met:
- The service member is stationed, in compliance with military orders, in a state that is not his resident state,
- The nonmilitary spouse is in that state solely to live with the service member, and
- Both the service member and spouse have the same resident state.
When the nonmilitary spouse meets the above qualifications, their wages from services performed in that new state will only be taxed in their resident state, not by the state they are currently living in.
IMPORTANT: when living in a non-resident state, the spouse needs to check the state laws to determine if they need to declare their non-residency for withholding purposes. This may be required by their employer on an annual basis.
See Military Filing Information on State Websites and the example below.
MSRRA rules are no longer applicable if:
- The service member leaves the service.
- The couple divorces.
- The service member moves to a new location where the spouse could join him/her, but chooses not to. If deployment is to a location where the spouse is not allowed to follow, it does not affect their MSRRA eligibility.
- The spouse clearly establishes the new state as a state of residence. This includes an action like applying to vote in that state.
Joe lived in Georgia all of his life until he’s 18 and joins the Army in Atlanta. No matter where he is stationed, every year he files a Georgia resident return and pays Georgia tax.
A few years ago, when stationed in Virginia, he meets Mary, a teacher in Pennsylvania. They get married and Mary moves to Arlington, Virginia to live with Joe. She takes a job as a teacher. Since she has never lived in Georgia, under the MSRRA, she can’t claim Georgia as her resident state. In this example, she lived in Virginia more than 183 days, so she is considered a Virginia resident and will pay tax on her earned income (and other income in Virginia.)
Joe receives permanent change of station back to Georgia and they both move to Augusta. Again, Mary has a teaching job. Since she lives there all year, she’s considered a Georgia resident. She and Joe will file a joint return and pay Georgia tax on all of their incomes.
A couple of years later, Joe is stationed again in Virginia. They both move back to Arlington and Mary is again teaching. Mary has decided to keep Georgia as her resident state. Now under MSRRA, Mary will NOT pay tax on her earnings in Virginia. She and Joe will file a Georgia resident return and pay Georgia tax on all of their income.
Note for Mary: She needs to check the Virginia state website to see how to request that Virginia income tax not be withheld from her wages. Since she will be paying Georgia taxes on her wages, she does need to have Georgia income tax withheld from her paycheck. If she does end up with Virginia withholding, she will have to file a Virginia tax return to get it back.
Note for Joe: If Joe works a nonmilitary job in Virginia, he may have to file a tax return and pay tax in Virginia. See Filing State Taxes When You're in the Military and Civilian Pay Earned by Active Duty Military for more details.
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