Military Spouse Exempt Pay

[Possi]

It sure would be nice if we had a "go-to" place for military spouses' exempt income. It seems to me that every single state does it differently, and it requires a phone call and a monumentous amount of time to get it right.

I just did a LA one, and if we had one place to document the way to handle it, I'd sure put my information there.

For LA, go to http://www.revenue.louisiana.gov/for...s/RIB10005.pdf

bam

[JoshinNC]

Federal Law now dictates pay for military spouses

See the explanation here:

http://www.jag.navy.mil/organization/documents/tax/TIM%2002-10%20Encl%202.pdf

Provided a spouse meets the requirements for the application of MSRRA, then their residency status for tax purposes follows that of their active duty spouse, and each state has promulgated regulations in accordance with MSRRA.

[David1980]

See the explanation here:

http://www.jag.navy.mil/organization/documents/tax/TIM%2002-10%20Encl%202.pdf

Provided a spouse meets the requirements for the application of MSRRA, then their residency status for tax purposes follows that of their active duty spouse, and each state has promulgated regulations in accordance with MSRRA.

It is helpful, but seems like most of the military returns I see the military taxpayer met their spouse while stationed outside their domicile, so the spouse doesn't share the same domicile. Really hate those returns...

[taxea]

It is helpful, but seems like most of the military returns I see the military taxpayer met their spouse while stationed outside their domicile, so the spouse doesn't share the same domicile. Really hate those returns...

As soon as the spouse becomes the spouse she/he should change residency to that of the person he/she married if it is to his/her benefit. He/she will, most likely, be moving there when the spouse in the service is done with his/her tour of duty.

If the spouse works in Hawaii his/her income is taxable.

[JoshinNC]

True

It is helpful, but seems like most of the military returns I see the military taxpayer met their spouse while stationed outside their domicile, so the spouse doesn't share the same domicile. Really hate those returns...

Those are the most complicated ones in this realm

[Possi]

From all over the US

I live in a large military area, and I get them from all over. Although the Federal law is the same for military spouses, the states all demand different methods to file for the exemption. Finding these obscure lines, obscure rules and necessary attachments to each state is extremely stressful, especially in the thick of the season.

Taxea, let's say the military spouse's home of record is the same as the servicemember, that spouse's income is not taxable to HI.

[ChEAr$]

Our own TheTAxbook (tm) put out an ectra blurb on this situation maybe two years ago when federal law decided to supercede state law.
Check the update service for it. It's on second page, last column as I recall.

[Gary2]

As soon as the spouse becomes the spouse she/he should change residency to that of the person he/she married if it is to his/her benefit. He/she will, most likely, be moving there when the spouse in the service is done with his/her tour of duty.

You can't change residency to another state without actually living in that state. For example, M enlists in CA and thus begins with CA as home of record. M gets stationed in TX, which allows M to change home of record and domicile to TX. M gets transferred again, and is now stationed in NY but gets to keep the TX home of record, so that none of M's military pay is subject to NY income tax. M falls in love and marries a New Yorker. That new spouse cannot claim TX as a home of record and thus cannot get any benefit from the MSRRA.

It's extremely common for military people to change their home of record to states without an income tax at their first opportunity. That rarely means they plan to return to that state upon leaving the service. TX is a counter-example, because there are good job opportunities there. AK is a prime example of a state where service members will claim residency with no intention of ever returning there.

[KathMorgan]

TaxBook

The TaxBook also has a great product called The All States Book. I know how to get to the different state websites to do research if necessary, but my All States book is never far away. All of the states that have taxes lists a paragraph for military treatment and for the military spouse residency relief act information. It's really handy.

[taxea]

I live in a large military area, and I get them from all over. Although the Federal law is the same for military spouses, the states all demand different methods to file for the exemption. Finding these obscure lines, obscure rules and necessary attachments to each state is extremely stressful, especially in the thick of the season.

Taxea, let's say the military spouse's home of record is the same as the servicemember, that spouse's income is not taxable to HI.

Still taxable to Hawaii. If spouse is employed or self-employed in Hawaii the income is taxable.

[taxea]

You can't change residency to another state without actually living in that state. For example, M enlists in CA and thus begins with CA as home of record. M gets stationed in TX, which allows M to change home of record and domicile to TX. M gets transferred again, and is now stationed in NY but gets to keep the TX home of record, so that none of M's military pay is subject to NY income tax. M falls in love and marries a New Yorker. That new spouse cannot claim TX as a home of record and thus cannot get any benefit from the MSRRA.

It's extremely common for military people to change their home of record to states without an income tax at their first opportunity. That rarely means they plan to return to that state upon leaving the service. TX is a counter-example, because there are good job opportunities there. AK is a prime example of a state where service members will claim residency with no intention of ever returning there.

But we are discussing the spouse not the military personnel.

[JoshinNC]

Not under Federal law

Still taxable to Hawaii. If spouse is employed or self-employed in Hawaii the income is taxable.

If the spouse is a resident of let's say NC (under MSRRA) and works in HI during the year, HI cannot tax the income earned in HI.

[Gary2]

Still taxable to Hawaii. If spouse is employed or self-employed in Hawaii the income is taxable.

That changed in 2009 because of the Military Spouse Residency Relief Act (MSRRA).

But we are discussing the spouse not the military personnel.

Because of the MSRRA, you must look at both together. You can only separate the two after determining that the MSRRA doesn't apply.

[JoshinNC]

Agree with Gary

That changed in 2009 because of the Military Spouse Residency Relief Act (MSRRA).


Because of the MSRRA, you must look at both together. You can only separate the two after determining that the MSRRA doesn't apply.

on both points.

Did a large volume of research/studying on this subject early this season as I was advising a large volume of multi state military couples this year

[FEDUKE404]

Military cannot be taxed by foreign state

If the spouse is a resident of let's say NC (under MSRRA) and works in HI during the year, HI cannot tax the income earned in HI.

That's EXACTLY the way I understand things. (Maybe things are somehow perceived differently in HI ??)

Of course, it can cut both ways. Client (long-time NC resident, as is husband) will soon join husband who is on active duty in Washington State.

She/he will continue to pay NC income tax on their wage/other income, even though they are exempt from any WA state tax...which does not exist in the first place.

As for changing the "tax home" for military personnel (it is quite convenient to claim FL or TX or similar origin) it is my understanding that some states, NC in particular, are quite aggressive in checking on NC residents who disappear from NCDOR tax records upon entry into the military. IIRC, the military has a form that must be signed/notarized where the person must state/certify the facts that justify changing home from state A to state B.

SIDE QUESTION: How difficult is it for the employers (let's assume WA resident is on active duty in NC and accompanying spouse works at a business in NC) NOT to withhold state taxes in the first place? I can envision local NC employers saying "You wanna do WHAT?!?"

FE