Tax Filing As A Military Spouse

Moving around as a military spouse creates all sorts of challenges, especially when it comes time to file your income tax returns.  The biggest question is usually:  where do I file?  Thankfully, the law is pretty clear and simple.

Spouse Taxes Pinterest

For most people, moving means changing your legal residence (domicile), and paying state taxes in the state where they are domiciled.  Active duty folks, through the Servicemembers Civil Relief Act, are not required to change their domicile when they move, and they are allowed to file their state income taxes in the state where they are domiciled.  Since the 2009 Military Spouses Residency Relief Act, military spouses have also been able to maintain their domicile, and pay taxes in that location, “if the residence or domicile, as the case may be, is the same for the servicemember and the spouse.”

Therefore, there are only two options for where military spouses can file their state income taxes:  in the state where they are domiciled, if it “is the same for the servicemember and spouse,” or in the state where they are physically living.

This may mean that a military spouse has to file in a different state from their active duty service member, or may have to file in more than one state, if they moved during the year.

There are a lot of misconceptions about what the Military Spouses Residency Relief Act does and does not say, but it is actually pretty simple.  A military spouse is permitted to retain their legally obtained domicile if they leave the state due to their active duty member’s PCS orders, and they may file income taxes in that state, as long as the domicile of both the military member and the spouse are the same.

The Military Spouses Residency Relief Act does not authorize a military spouse to use any other state for their tax home, nor does it provide any mechanism for the military spouse to obtain or regain residency in the state of their active duty servicemember’s domicile.

I am sure you have heard a wide variety of different things from different people, and there is a LOT of misinformation out there.  Even official sources that were published shortly after the law’s passage often contain inaccurate information.

Questions?  Comments?  You know I love to hear them!

 

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.
  • Marcy

    ?question? Do we have to file state taxes of the state we own a rental home in? It is not the state we currently live in and not the state we claim residency in?

    • Kate

      Marcy, you will need to file a non-resident return in the state in which you have a rental property. Depending on your level of loss or profit, you may not owe any tax, and if you do, it will probably not be much. But it is always better to do it properly!

    • Ben

      I recommend that you contact your tax advisor. Since the “Rental Property” is located in a different state than where you live, you will be taxed on the rental revenue in the state that the rental property is located.

  • John

    Our military pay with there lives they should not be made to pay income tax period

  • Jenn Noyes

    My husband was deployed all last year, I moved back home to Vermont and worked. He claims me and our kids on federal. I am still an AK resident. How do I file our state taxes? He is exempt being deployed and not a resident, I have no idea how to file on my own? Do I include the kids? Please help.

    • Kate

      Just because your husband’s income was tax-exempt does not mean that he doesn’t have to file. In fact, he may be eligible for refundable credits based upon his work. You will file your joint federal return as usual. If you are both AK residents, then you file a AK state return as usual. If he is a resident of somewhere else, then you will file for him in the state where he is a resident, and you will file for yourself in Vermont because the military spouse exception law only applies if you share the same state of residence as your active duty spouse. Both of your state returns will be based upon your joint federal return, with the income of the non-resident spouse backed out.

      It’s not hard, but it can be confusing if it’s not your thing. Online programs seem to work well, or you can get help from MilitaryOneSource, or the Volunteer Income Tax Assistance program on base.

  • Crystal

    I work for a hospital in NC. When I mention paying state taxes to Nebraska which I keep as my state of residency like my active duty husband, a lot of the military wives that I work with say I do not have to pay state taxes. Most tell me they don’t pay NC state tax because they claim military spouse and so they keep all of their pay. Unless you hold residency in a state that has no state tax, aren’t you required to pay state taxes on your wages to the state you hold residency in? I assume I am correct in reporting my NC wages to Nebraska since I claimed the military spouse relief and did not pay any taxes to NC. It’s amazing to me how many of my fellow employees do not pay any. Any ideas if I am corrrect? Thanks!!

    • Kate

      Crystal, you are absolutely correct. You must claim your income in the state where you are a resident. That said, approximately 40% of military folks are residents of states that do not have state income tax, and therefore do not pay income tax. I suspect that working spouses are actually more likely to go to the effort to take advantage of the domicile exceptions in the Military Spouse Residency Relief Act, so perhaps that percentage is higher amongst working spouses?

      I would be really sad if lots of military spouses are taking advantage of the laws by not paying taxes anywhere and hoping that they did not get caught.

  • Anna

    My husbands legal residence is in the state of Illinois and that’s where we got married. I am originally from another country so would Illinois be considered my state of residence or California where we both currently physically reside and I worked for the past 2 years. As of now I receive my CA taxes back and I turn around to pay them to IL which is 3 times higher. I am not sure if that is what I’m supposed to do, can I just pay taxes to the state of CA?

    • Kate

      Anna, your legal residence is wherever you are showing signs of domicile. This is usually demonstrated by where you have a driver’s license, where you vote, where you have your vehicle registered, etc. Unless you do all those things in Illinois, there is no reason to think that your domicile is Illinois, so it must be California.

      Military spouses always have the option to pay their state income taxes in the state where they are physically residing.

  • Anne Jeanne Renshaw

    my Husband passed away June 2014 , he was retired Military I haven’t recieved any statement thru the mail to fill out my taxes so how do I get it, I think he did all of it on line but I wouldn’t know the first thing about doing it. PLEASE help me April 15th will be here soon

    • Kate

      Mrs. Renshaw, my condolences on your loss. Military retiree 1099R tax statements are issued by the Defense Finance and Accounting Service (DFAS). Unfortunately, they are not automatically issued for deceased members. You need to request a 1099R from DFAS. I think the best way to do this is going to be via the telephone, 1-800-321-1080, Press 1, then Press 1 again, Enter social security number. Waits to get through to someone in DFAS are notoriously long, I would recommend a beverage and a book before you sit down with the telephone.

      Good luck to you, and please reach out to a friend, family, or veterans service organization if you need help.

  • Andrew

    Hello Kate,

    I am active duty serving in Delaware, but I was previously stationed in Texas and I maintain Texas as my state of residency. My wife and I got married after I left Texas, so she is not a Texas resident. She works at home (in Delaware) but I am wondering if she can change her state residency to Texas even if she’s never lived in the state. I’m assuming this isn’t allowed, but I wanted to at least ask to see if we could take advantage of some of the tax benefits of Texas. Thanks!

    • Kate

      Andrew, the laws about domicile are made at the state level, so technically, that would be up to the state of Texas. Depending on their requirements, it is possible that there might be some grey area that you could use to establish her domicile in Texas. Due to the requirements of the Real ID Act, it is going to be nearly impossible if you don’t have some physical ties to Texas, such as family living there or you owning a property there.

      There are no provisions in the Military Spouses Residency Relief Act that give her permission to establish domicile in Texas, or make it easier for her than for anyone else.

  • Michael

    A quick question. I have been in the military for 12 plus years and have always maintained my Michigan residency. I am currently stationed in Alaska and this past year I married an Alaskan citizen originally from Washington State. When filing our taxes with HnR Block they informed me that she has to file Michigan Income Tax because she became a Michigan resident the minute we got married. She has only visited Michigan once and has worked and lived in Alaska for the past 3 years. Is she covered under the MSRRA and still an Alaskan resident?

  • Rachael LaCross

    I am a military spouse stationed in Germany. I work for a US based company under US govt contract at the military base we are stationed at. I don’t have any federal income tax witheld, so which do I qualify for: Earned income tax credit or Foreign earned income Exclusion?

    • Kate

      You’ve got a couple of different issues here. First, you should probably be having federal and state income tax withheld from your pay.

      In my opinion, you are not eligible for the foreign earned income exclusion. This is subject to interpretation, and I am sure that you will find people who say that you are eligible to take it. However, it is the position of the IRS that the key factor in eligibility for the FEIE is intent. I’m guessing that you don’t have any intent to remain in Germany indefinitely; your presence there is incidental to your spouse’s posting there. The law was designed to give US citizens who are paying local income taxes relief from having to pay income taxes to both countries. If you do choose to take the Foreign Earned Income Exclusion, be aware that your tax relief will be small, as it is calculated based upon the excluded income being the only income and therefore is a very small exclusion.

      Whether you are eligible for the Earned Income Tax Credit depends on your family size and overall income level. Your presence overseas has no bearing on the Earned Income Tax Credit calculations.

  • Aloha

    My question is now that my husband and I PCSed back to the our home of record, do I still get refunded the entire state tax amount I paid last year working in his previous duty station? We would usually get the state taxes back. Thanks!

    • Kate

      I’m not sure the question exactly. You don’t have a Home of Record, that is a military thing that just means the place from which a person entered the military. If you are asking how to be refunded state taxes that were withheld by a state that is not your state of residency, then you would file a non-resident tax return. You always have to file state taxes in the state where you are a resident, if they require filing.

      For example, if you are a resident of Maryland, but were living in North Carolina, you would file a non-resident return in North Carolina and a resident return in Maryland, even though you did not live in Maryland. You don’t get to exclude your income from state taxes altogether (unless your state of residence doesn’t have an income tax) but rather you get to file in the state of your legal residence (as long as it is the same state as your active duty spouse.)

      I’m not sure if that answers your question.

  • Beth

    I moved from la to ak with a military member before we were married. I registered in to vote in ak and then we married, and now we moved to fl. Are we or am I still considered ak resident?

    • Kate

      Beth, there are no hard and fast rules about being considered a resident of, or domiciled in, a particular state. Rather, it is all about intent, and the things that you do demonstrate your intent. You might find this helpful: http://live-military-paycheck.sites.thewpvalet.com/2014/07/2… I recommend that my clients make a thoughtful decision about where the active duty member wants to have as their state of legal residence, and make choices based upon that decision. That said, an active duty member can not simply choose any state, but must follow the laws regarding establishing domicile. In a perfect world, that would be the state in which he or she was currently residing, as it makes the situation much easier. It would also allow the spouse to establish domicile in the same state as the active duty member, which is one of the criteria for utilizing the provisions of the Military Spouses Residency Relief Act.

      Florida is generally considered a highly desirable state of residence since it does not have state income tax.

  • Ashley

    I am a military spouse…my husband and I both have PA as our state of domicile, but we are living in NC. I started a photography business back in PA and have only had clients from there, so all of my sales tax and income tax has gone to PA. Does MSRRA make any exceptions for self-employed military spouses where I would still only pay income taxes to PA, and only apply sales tax to customers who are within the state that my business is registered? Or do you think I need to re-register my business in NC, get a NC sales tax ID and start charging taxes here as well? It’s so confusing when I’m being asked to go over state lines, not even just PA and NC!! I know this is slightly off topic, but I would appreciate your input or even a suggestion as to where to find more information!

  • nola

    Hi,

    I recently moved to GA to be with my husband. Our residency has been in FL but when I started to work in GA, they were taking state tax. I reached out to HR about military spouse relief act and they stopped taking state tax then. How do I go about getting the reimbursement for the GA state tax? I was told that there’s a voucher. Is this correct?

  • Alison

    My husband and I are both Ca residents! Now stationed in NC! Based on what I have read I qualify for MSRRA and my employer has not been taking out state taxes! Do I have to pay taxes to CA? When I read the information from Ca it says I am considered a non-resident for tax purposes.

    • Kate

      Alison, I am not familiar with California’s tax laws. If you are not paying taxes to North Carolina, then you are responsible for reporting your income to California. Whether you are required to pay taxes on that income is up to California.

      Please make sure that you have experienced and competent advice to guide you through this process. Most states have a provision for non-residents to not pay taxes (and pay them wherever you are a resident.) You’re claiming the opposite – that while you don’t live there, you’re actually a resident. California is notorious for having tricky and confusing tax laws.

      Good luck to you!

      • Alison

        When I do it through turbo tax it says I owe nothing to both!

        • Kate

          Alison, it is entirely possible that is correct, depending on a wide variety of factors. You might want to have a quick chat with a tax professional (you can talk to one for free via MilitaryOneSource) to ensure that you have it exactly right.

  • Julianne

    Hello,

    I recently got married in December and I am a travel nurse. I’m originally from Texas and I’ve always maintained my mother’s TX address as my residence while living there, even when I was travel nursing (I took assignments in MD, NC, and TX), my husband is from IL. I just came to MD from TX in February 2015 because that’s where he is stationed. I haven’t been working since October because I gave birth to our daughter. If I decide to take another travel assignment soon, what would I claim as my tax home? If it’s MD, does that mean I have to claim MD as my home of record now?

    • Kate

      Julianne, there are a couple of issues here. It is important to understand that you do not have a home of record. That is strictly a military term that refers to the state from which the service member entered the military. You have a state of military residence, or domicile. It sounds like your domicile is Texas – driver’s license, voter registration, actually voting, etc.

      As a military spouse, you have the option of paying taxes in the state where you actually reside, or in your state of residence IF it is the same as your husband. Since y’all don’t share the same state of legal residence, then you would have to claim your taxes to Maryland.

      Now, I am not a tax attorney and I am not familiar with the nuances of traveling nurses. I would check to see if there are any special rules that apply to that situation.

  • Matt

    My wife worked a year in NC, with NC taxes coming out of her check, not knowing about the MSRRA. we are both from MI. Michigan doesn’t take state taxes out for military. is there a way she can get the money back for the NC taken out of her pay check last year?

    • Kate

      Matt, she can file a non-resident return in North Carolina to be refunded the taxes paid there, and file in Michigan.

      Be sure to double check that Michigan does not tax the income of military spouses. That sounds unlikely to me, but I hear things that surprise me ALL the time.

  • diane

    ok my daughter meet a navy guy when she lived in florida, she married him and moved to virginia, his domicile is ohio, is she ble to still claim florida, she works in virginia but does not have a virginia voting card, and never lived in ohio h and r block said she wouoldnt pay virginia tax but she cant claim oho because she never lived there, i am her mother and she has ties in florida

    • guest

      She’s not covered by MSRRA since they don’t have the same domicile (ohio). HR block knows little about military taxes, have her see the free tax office on post but in all likely hood she has to pay VA taxes.

  • Dawn

    My husband and I currently live in Georgia but both have our home of record in Florida. Since my Father died I inherited some money that is invested (it can either make a gain or a loss on your taxes). I am not sure if I would need to claim that income or loss in Georgia or Florida? Does anyone know?

    • guest

      You need to speak to an estate attorney, there are a MILLION possibilities here based on inheritance amount and where that money is stored. For example, if the money is in an IRA there are are certain rules you need to follow to withdraw it without getting slammed by taxes (ie do NOT take it out of the IRA until you learn more about it).

      Also different states have different laws, When we went through this with my husband he was a legal non resident of CA, however had to pay taxes to CA on the inheritance since his grandmother was a resident. That said after the taxes were paid, he rolled into a different taxable account under his name, which is no longer subject to state tax as long as he remains a legal non resident of his HOR which is why we keep all our taxable investments in his name only (and yes, I got this in writing from the CA state tax office)

  • Janice

    We are both residents of Alaska. My husband PCSd to SC unaccompanied and renting a home. I remained working in NC (residing in the home we purchased prior to the PCS orders). We have Alaska rental property in “OUR” name. We have always filed our taxes married/joint; filing married/separately would make things complicated since this is a business tax credit. Now that we are living separately do we “have” to file married filing separately? Or is it our choice without penalty or being — bad word alert…audited by the IRS? Thank you for your time.

    • Kate

      Janice, I am not 100% sure, but I believe that you are required to file in North Carolina. The MSRRA applies to military spouses who are only living in their location due to their active duty husband/wife’s orders to that state. Since you made the decision to remain in North Carolina after he left, the MSRRA rules don’t apply to this situation.

      I would seek out several different competent sources of advice, including your base legal office, before figuring out how to proceed.

  • Justin

    My wife and I are both Texas residents but have been stationed in CA for over 2 years. Last year she did her taxes and got all of her CA state taxes back. This year they took more out in CA taxes and it says that we are not getting anything back?!? TX does not have state taxes but since she works here in CA they take the taxes out of her check. should she be getting all of that money back?

    • Kate

      Justin, it is not uncommon for a state to challenge the assertion that someone is not a resident, especially if they live and work in that state. Has your wife been careful to show her intent to remain a Texas resident through all her actions, including voting in Texas, maintaining a Texas driver’s license, keeping her vehicle registered in Texas, etc?

      From your comment, I’m not sure who or what is saying that she is not getting a refund of the taxes she had withheld by California. If it is the State of California, she may need to prove that she is not a resident.

      One solution for the future is for her to change her state withholding to not have any state taxes withheld from her pay.

      • Justin

        Kate, first of all thank you for taking the time to reply. She currently has all of the list still set up and is a resident of TX. We went ahead and filed as is for now and if we find out that she is entitled the refund then we will do an addendum and have to re-file to correct this issue. My wife is not getting the refund of the taxes withheld. Do you know how to go about proving she is a resident? We filed through TurboTax.

        I will see if that is something she can set up with her employer.

  • Cynthia

    My husband and I are stationed overseas in Japan but we have different home states. He is from PA and I am from DE. Previously the military tax office has only filed state taxes for PA, but now that I am working I wonder if I need to file for DE state tax?

  • Ana

    My husband’s hor is FL. I am from Europe and last time I voted here we were living in TX where I am still a registered voter. My driver’s license is from KS and we are currently stationed in GA. My car is registered in GA as well now. I started working in March and get state taxes taken out of my paycheck. Can I get excempt from having state taxes taken out since I am a registered voter in TX? Thank you.

  • egwerner

    I am from Pennsylvania but I have not lived or worked there in about 10 years. We are stationed in NC where I work. This year when we filed taxes, I filed NC state taxes, but then I was told that I was entitled to have all my taxes returned. That doesn’t seem to make sense to me. Why am I even having them withheld from my paycheck if they will all be returned?

    • Ashley

      You will file NC and get all of it back if you are a resident of PA. If you are than you will then submit to PA and pay them out of the amount you got back from NC.

  • Rhonna

    My husband is PCS’ed in the UK for 3 years. We just moving from CA, which was our residence. I am continuing to work for my company in CA, but they are asking for proof that CA is my state of residence for my tax withholding. I’m not sure what to tell them. I know I will still pay federal tax on my income, but not sure about the state part. Do I pay CA? Do I have to pay the UK too? And what do I need to give to my employer as proof of CA residence?

    I don’t want to get this wrong and then have penalties to pay. Any direction you can give will be helpful.

    • Kate

      Rhonna, you’re in a complicated situation and definitely need to get professional tax help from someone who understands both ex-pat tax issues and military spouse tax issues. I have a lot of opinions on this topic, but none of them are official tax or legal advice and it would be inappropriate to share them here. I wish I could help you more! Good luck!