In 2009, President Obama signed into law the "Military Spouse Residency Relief Act,"[1] which specifically amended the income tax protections of the Servicemembers Civil Relief Act ("SCRA") to include income tax protections for active duty service members' spouses.
While the income tax protections for military spouses are now five years old, it is far from clear to most military spouses how we are actually protected. In order to best apply this law, you should know which category you fall into.
Those who are not eligible for the protections of the MSRRA
If you are not legally married to an active duty service member, then you are ineligible for the protections of the MSRRA. Common examples include those who are married to a retired service member, children of an active duty service member, or, for same-sex couples, those who live in a state that doesn't recognize same-sex marriage. If you aren't protected by the MSRRA, then you must follow the laws of the state where you are currently living. When it comes to income taxes, for example, if you have earned income in the state where you live, you must file and pay income taxes in accordance with your state's laws. Period.
Those who do not need the protections of the MSRRA. at least for now
If you have no earned income, then generally speaking, you don't need the protections of the MSRRA. Likewise, if you have earned income but are living in a state that doesn't have a state income tax, then you do not need the protections of the MSRRA. We all know how quickly our circumstances can change, however, so keep reading on. You may need the protections of the MSRRA when you get to your next assignment.
Those who are protected by the MSRRA, but only for now
Twenty-two states require that active duty military member and his/her spouse be residents of the same state in order for the spouse to enjoy the income tax protections of the MSRRA. If you are a Tennessee resident, married to an active duty service member who is a Texas resident, and you are stationed South Carolina (which doesn't require that you and your spouse be a resident of the "same state" to enjoy the protections of the MSRRA), then you would pay no income taxes at all, since Tennessee doesn't have a state income tax. Consider what happens when you move to Georgia, however. You and your spouse might both be residents of states with no income tax (TX and TN), but Georgia requires that you and your spouse be residents of the "same state" in order to enjoy the protections of the MSRRA. Thus, you would pay income taxes to the state of Georgia.
Whether you are in a "same state" rule situation depends on what state you currently live and work in. Be sure that when you are hiring a CPA, you ask him/her whether he/she is familiar with the provisions of the MSRRA, and make sure that you are carefully following the rules of the state in which you live and work.
Those who are most likely to be protected by the MSRRA
For those of you who share the same state of residency with your active duty spouse, you are most likely to be protected by the MSRRA. The most common remark I hear is "I am a Florida resident. I think." There are no hard and fast rules for what makes you a "resident," but making this declaration is the first step in determining whether you are a resident of a particular state. The next most important indicator, for purposes of the MSRRA, is what state you are registered to vote in. Beyond that, there are only so many things you can do to indicate residency in a certain state when you are moving every few years, but you would be wise to strengthen your case and, of course, keep good records.
In summary, if you are the legal spouse of an active duty service member who has earned income, you are eligible for and in need of the protections of the MSRRA. The best way to protect your eligibility is to become a resident of the same state as your active duty spouse. That way, no matter what state you move to and earn income in, you will remain eligible for the protections of the MSRRA. To be confident that you are a resident of a state, especially one where you've not actually lived, you need to really become a resident of that state. Adopting your active duty spouse's state as your own for purposes of avoiding state income or property taxation in the state where you live can have serious legal and financial ramifications.
Tax laws are complex and subject to change. Individuals are encouraged to consult their tax and legal advisors for tax advice.
Nicci Clark is currently stationed alongside her husband at Robins AFB, GA, where she serves as a Key Spouse Mentor for the 12ACCS. She has served on several OSC Boards, including Columbus AFB, MS; AFOWC, DC; Ramstein AB, Germany; and Robins AFB, GA. She is a member of the Nebraska Bar Association and the MSJDN and was recently selected to join the 2014 Robins Region Leadership Class.
Sources:
Same-State Rule States (22):
Alabama / Form A4-MS
Arizona / Form WECMArkansas / Form AR-MS
Colorado / Form DR 1059
Connecticut / Form CT-1040NR/PY
Georgia / Form G-4
Idaho / Form ID-MS1
Illinois / Form IL-W-5-NR
Indiana / Form WH-4MIL
Kentucky / Form K-4M
Maine / Form W-4ME
Massachusetts / Form M-4-MS
Minnesota / Form W-4MN
Mississippi / Form 89-350
Montana / Form MSR
North Carolina / Form NC-4EZ (note form is silent, but Dept of Rev guidelines say same state rule applies)
Ohio / Form IT MIL-SP
Pennsylvania / Form REV-419 EX
Oklahoma / Form OW-9-MSE
Rhode Island / Form RI-W4
Utah / Form TC-40A
Virginia / Form VA-4
States that don't require "same state status" (17):
California / Form DE 4
Delaware / Form W-4DE
Kansas / Form K-4
Iowa / Form W-4
Louisiana / Form L-4E
Maryland / Form MW507M
Michigan / Form MI-W4
Missouri / Form MO W-4
New Jersey / Form NJ-165
New Mexico / Form RPD-41348
New York / Form IT-2104-E
North Dakota / Form NDW-M
Oregon / Form 40N
South Carolina
Vermont / VT Schedule IN-113
West Virginia / Form IT-104
Wisconsin / Form W-221
States with no income tax (9):
Alaska
Florida
Nevada
New Hampshire* (no income tax, but does tax interest and dividends)
South Dakota
Tennessee* (no income tax, but does tax interest and dividends)
Texas
Washington
Wyoming
