There are two terms used by the military to define your state of residence:
Home of Record. Your home of record is the state recorded by the military as your home when you were enlisted, appointed, commissioned, inducted, or ordered in a tour of active duty. This is often the state you should continue to use as your tax home as you move from state to state (or overseas) on military orders.
State of Legal Residency. Your state of legal residency (SLR) is your "Home of Record," unless you changed it to another state. Changing the state on your paycheck records doesn't change your SLR.
To change the SLR, a DD Form 2058 must be submitted to your local finance officer and accepted.
From a tax standpoint, your State of Legal Residency (SLR) is considered your "domicile" or "resident" state as long as you are on active duty. Even if you are stationed in another state, you’re still considered a resident of your SLR.
To find out if you need to file a state tax return when you aren't stationed in your resident state, check out Military Filing Information on State Websites, which has links for active duty military and their spouses in each state. If you have nonmilitary earnings, review Civilian pay earned by active duty military.
IMPORTANT: The Military Spouse Residency Relief Act (MSRRA) describes where spouses of military service members can file state income taxes. For more info, see What is my state of residence as a military spouse?
Consider Chris, who lived in South Carolina when they joined the military in 2010. This was recorded as their Home of Record and SLR. With Permanent Change of Station (PCS) orders, Chris is now stationed in Maryland and lives in Virginia.
Chris files a resident return in which state?
We know that Chris is considered a South Carolina resident (that's their State of Legal Residency). South Carolina says that Chris must continue to file a South Carolina resident income tax return regardless of where they're stationed.
Each state decides whether service members must file a return when they're stationed outside their resident state.
If their SLR was in a different state, Chris might be required to file a return for that state and then deduct all of their active duty income, resulting in little or no state income tax. Some SLR states, like South Carolina, will tax Chris on their income even if they're stationed outside of their SLR state.
Other SLR states (such as California) may consider their service member as nonresident when stationed outside their state. For guidance about filing in a state other than your SLR state, see that state’s military page at state tax websites.
Does Virginia or Maryland expect a tax return from Chris?
The Service Member Civil Relief Act states that an active duty member isn't considered a resident of a state unless it's their SLR.
Chris would only file a Virginia or a Maryland return if they had a civilian (nonmilitary) job in that state. If they work at Home Depot in Virginia on the weekends, they would file as a Virginia nonresident and only report income from that W-2. Chris wouldn't report any other type of income on their Virginia return. They would still file a South Carolina resident return, where they may get a credit for the tax they paid on their wages to Virginia.
If Chris is married and their partner works in a civilian job in Virginia, then the partner might have to file a state tax return in Virginia. However, if the partner qualifies under MSRRA, they might also be able to claim South Carolina as their state of legal residence along with Chris. Additionally, the partner might also be exempt from filing a Virginia state return. Be sure to check with the state you're currently in for its laws. For more info see Military Spouse Residency Relief Act and state taxes.