From The Mailbag: Military Spouse Residency Relief Act

Letters, we get letters,  we get lots and lots and lots and lots of letters.  And some of them are pretty darn helpful.

Today’s letter is about the Military Spouse Residency Relief Act (MSRRA) passed in  2009  .  We’ve got an entire category devoted to the MSRRA.  If the link doesn’t work, you can look down a bit on the left hand side of this page.  MSRRA is listed in with the other categories.  It is complicated and frustrating, but it was a law written with good intentions and it is a huge boon to the spouses who are able to use the provisions that are listed in the act.

The original letter asks:

Under “The Act”, do military spouses residing in a state other than their home of records have to claim their HOR state for State payroll tax purposes, or do they have the option of choosing to pay state payroll taxes in the state that they reside in? (i. e. Virginia is HOR, but stationed in NC)

This is a really common question.  Here’s my reply:

There are a couple of issues here.  First, spouses don’t have homes of record.  It’s a concept that only applies to active duty members.  The concept that you’re looking for is called domicile.

Domicile is defined as the place  that one considers “home.” It is the place where one has lived and formed the intent to remain for the indefinite future and return when temporarily absent.  Generally speaking, domicile is exhibited by these activities:  registering to vote, actually voting, registering vehicles, obtaining a driver’s license, accepting homestead tax breaks for property, and indication on a last will and testament.  However, exact domicile laws are determined at the state level.

The Military Spouse Residency Relief Act allows military spouses to claim legal domicile in one of two places:  their actual state of residence, or the state in which their active duty husband or wife is domiciled.  For example, my husband is domiciled in Florida and we live in Maryland.  I can establish domicile in one of those two places.  I can not be domiciled in our last state of residence, or any other state.

You pay state income taxes to the state in which you are legally domiciled.  Without knowing all your details, I can’t say which state that might be.

I hope that helps!

As I said in the response:  I’m not a lawyer.  I’m just a military spouse who enjoys reading about geeky stuff like taxes and laws and benefits. I strongly encourage every one of you to read and try to understand the Military Spouse Residence Relief Act.  It can be an important benefit if you are able to use the act to avoid paying state taxes in a state just because your spouse is stationed there.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.