Military Spouses
On November 11, 2009, President Barack Obama signed into law the Military Spouses Residency Relief Act (PL 111-97), which will ensure that the spouses of military personnel who move because their spouse is posted for military duty will be treated as not having changed residency for tax purposes. The Act conforms the treatment of military spouses to the treatment accorded military personnel under the Servicemembers Civil Relief Act (SCRA).
Under the SCRA, a member of the Armed Services who is a legal resident of one state, but is stattioned in another sate by virtue of military orders, is not subject to the income tax paid on pay for services performed in their state of military domicile. The Military Spouses Residency Relief Act of 2009 (MSRRA) amends the SCRA to provide that a spouse shall neither lose not acquire domicile or residence in a state when the spouse is present in the state solely to be with the servicemember in compliance with the servicemember's military orders if the residence or domicile is the same for both the servicemember and the spouse.
In general, for tax purposes, the MSRRA permits spouses of military personnel who move into a state to be with the servicemember to retain their former state of residency (state of resident domicile) and claim exemption from income tax on pay for services performed in their state of military domicile, provided that they all meet all of the following eligibility requiremements:
- The servicemember is present in the state of military domicile in compliance with military orders
- The spouse is in the state of military domicile solely to be with the servicemember
- The spouse's current state of military domicile is different from their state of resident domicile
- The spouse and the servicemember were both previously domiciled (lived in and paid taxes to) in the same state and the servicemember currently maintains domicile in that state. (For MSRRA purposes, the military spouse must have the same state of resident domicile as the servicemember.
The MSRRA provisions allow for an exemption from income tax only. This act has no effect on Unemployment Insurance Taxes, Disability Insurance Taxes, or Worker's Compensation Insurance taxes. These taxes will continue to be reported and remitted to the state in which an employee works, including a qualifying military spouse.
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