Filing Taxes as a Military Family

Filing taxes as a military family can be confusing due to some tax laws aimed specifically at military families.

The Military Spouse Residency Relief Act (MSRRA) was amended in 2018 to allow military spouses to elect the same residence state as their Active Duty spouses, even if they have never been to that state.

What does this mean?

Regardless of where you’re stationed, the Active Duty Service Member pays state income taxes to their Home of Residence (HOR) state. As a spouse, you can elect to also file taxes in that state and only have a liability there, as long as you’re only living at your current residence in order to be with your Active Duty spouse. This also means you don’t have to pay income taxes to the state where you’re physically working if it’s not the HOR.

Examples:

• John and Tina are stationed at Fort Bragg, NC. John’s HOR is listed on his LES as TX. Tina works locally in North Carolina and has North Carolina taxes taken out. When John and Tina file taxes at the end of the year, Tina can file to receive all taxes paid in North Carolina back to her, because Texas does not have an individual income tax, and that is where she gets to claim residency.

• Adriana and Luke are stationed at Fort Carson, CO. Adriana has IL as her HOR on her LES, and Luke works locally in Colorado. When filing taxes at the end of the year, they can file jointly in both states. Colorado will owe them a refund of all taxes paid. However, part of what is paid back by Colorado may be due to Illinois because the income that wasn’t taxable in Colorado is now taxable in Illinois. (The bright side is that Illinois doesn’t tax military income, so only the civilian spouse’s income would be taxed)

If you need help figuring out where you should file taxes, or how to get your employer to stop taking out state income taxes that you don’t owe, please contact us.