Making sense of state income taxes for service members Print E-mail
Thursday, 31 January 2013
By Capt. Bridget Karns
Special to GUIDON

Filing federal income taxes can be a bit confusing, and adding in the element of state income taxes makes the task even more daunting. This is especially true with service member’s and their Families, as they are constantly moving from state to state. Here are a few simple rules and explanations to help you make sense of state income taxes.  

States have the authority to tax the income of those who are domiciled, as well as state residents. A person is domiciled in a particular state when there is a presence and a shown intent, such as: physical presence, ownership of property, voter registration, vehicle registration or home of record. This list only names a few the indicators in how one establishes a particular state as their place of residence.  

Because service members are constantly moving around, it’s important to remember that the service member’s Civil Relief Act provides that the service member neither acquires nor loses residence or domicile by living in a state as a result of military orders.  This means that a service member’s income is only taxable by their state of domicile. How military income is taxed varies by state.

For example, some states do not require service members who are stationed outside the state to pay taxes. New York and Missouri employ a three part test which allows a service member to avoid paying state taxes if:  the service member does not have a permanent home within the state; the service member has a permanent home outside the state, and the service member spends a maximum of 30 days a year within the state of domicile. Other states do not tax military income at all.

If you have questions about your state, please call the Fort Leonard Wood Community Tax Center at 596.1040.  

Another element to this issue is how a spouse’s state income tax is determined. Military spouses are also constantly moving around and this can create some confusion for taxpayers. The Military Spouse’s Residency Relief Act of 2009 helps to answer this question. The statute gives spouses of service members the ability maintain their state of residence for purposes of taxation when their service member spouse receives orders to move to another state and they accompany them.  

For example, Pvt. Joe who is a resident of Missouri is stationed in Georgia. Pvt. Joe meets and marries Jane Doe, a resident of Georgia.  Pvt. Joe receives orders to Virginia and he and Jane Doe move to Virginia where Jane Doe gets a job. Under the Military Spouse’s Residency Relief Act of 2009, Jane Doe’s income will still be taxed by Georgia, even though she is living and working in Virginia.

(Editor’s note: Karns is a legal assistant attorney assigned to the Fort Leonard Wood Legal Assistance Office and is the Fort Leonard Wood Tax Center officer-in-charge.)
For example, some states do not require service members who are stationed outside the state to pay taxes. New York and Missouri employ a three part test which allows a service member to avoid paying state taxes if:  the service member does not have a permanent home within the state; the service member has a permanent home outside the state, and the service member spends a maximum of 30 days a year within the state of domicile. Other states do not tax military income at all.

If you have questions about your state, please call the Fort Leonard Wood Community Tax Center at 596.1040.  

Another element to this issue is how a spouse’s state income tax is determined. Military spouses are also constantly moving around and this can create some confusion for taxpayers. The Military Spouse’s Residency Relief Act of 2009 helps to answer this question. The statute gives spouses of service members the ability maintain their state of residence for purposes of taxation when their service member spouse receives orders to move to another state and they accompany them.  

For example, Pvt. Joe who is a resident of Missouri is stationed in Georgia. Pvt. Joe meets and marries Jane Doe, a resident of Georgia.  Pvt. Joe receives orders to Virginia and he and Jane Doe move to Virginia where Jane Doe gets a job. Under the Military Spouse’s Residency Relief Act of 2009, Jane Doe’s income will still be taxed by Georgia, even though she is living and working in Virginia.

(Editor’s note: Karns is a legal assistant attorney assigned to the Fort Leonard Wood Legal Assistance Office and is the Fort Leonard Wood Tax Center officer-in-charge.)
Last Updated ( Wednesday, 13 February 2013 )