Filing State Income Taxes When You're in the Military
If you're a member of the military, you might not be sure if you're filing the right state tax return
First, you need to understand these two terms used by the military:
Home of Record. Your home of record is the state recorded by the military as your home when you were enlisted, appointed, commissioned, inducted or ordered in a tour of active duty.
State of Legal Residency. Your state of legal residency (SLR) is your “home of record,” unless you changed it to another state.
Military members often mistakenly think that changing the state on their paycheck records changes their SLR.
To change the SLR, a DD Form 2058 must be submitted to your local finance officer and accepted. For information on requirements for valid changes when filing Form 2058, check out this Fact Sheet on Legal Residence posted by the U.S. Air Force.
From a tax standpoint, your State of Legal Residency (SLR) is considered your “domicile” or “resident” state as long as you are on active duty. Even if you are stationed in another state, you’re still considered a resident of your SLR.
To find out if you need to file a state tax return when you aren't stationed in your resident state, check out Military Information on State Websites. You will see links for each state with information for active duty military and their spouses.
IMPORTANT: A recent law affects where the spouses of military service members can file state income taxes. For more information, see Military Spouses and State Taxes.
An example
Consider the example of Joe, who lived in South Carolina and joined the military there in 2000. With Permanent Change of Station (PCS) orders, he now is stationed in Maryland and lives in Virginia.
Joe files a resident return in which state?
We know that Joe is considered a South Carolina resident (that's his “home of record” and his SLR.) South Carolina says that Joe must continue to file a South Carolina resident income tax return regardless where he is stationed.
Each state decides whether service members must file a return when they are stationed outside their resident state. If Joe’s “SLR” was in a certain state, he might be required to file a return, then deduct all of his active duty income and pay little or no tax. Some “SLR” states, like South Carolina, will tax Joe on his income even if he is stationed outside of his “home of record.”
When California is a “home of record” and the active military is stationed outside of California, the service member is considered a nonresident of California. For guidance about filing in a state other than your “state of legal residence,” see that state’s military page on their individual website found at State Tax Websites.
Does Virginia or Maryland expect a tax return from Joe?
The Service member Civil Relief Act states that an active duty member is not considered a resident of a state unless it is his SLR.
Joe would only file a Virginia or a Maryland return if he had a nonmilitary job in that state. If he’s working at Home Depot in Virginia on the weekends, he would file as a Virginia nonresident and only report income from that W-2. He would not report any other type of income on his Virginia return. He would still file a South Carolina resident return. On his resident return, he may get a credit for the tax he paid on his wages to Virginia.
If Joe is married and his wife works in a civilian job in Virginia she might have to file a state tax return in Virginia. However, if she qualifies under the 2009 Military Spouses Residency Relief Act, she might be able to claim South Carolina as her state of legal residence, along with her husband, and also be exempt from filing a Virginia state return. For more information, see Military Spouse Residency Relief Act and State Taxes.
