Moving from place to place requires a lot of effort and changes. The Servicemembers Civil Relief Act provides guidance for military spouses on where they pay earned income tax when living in a different location due to their member’s military orders. Over the years, the SCRA was amended, changing the options military spouses have in choosing their state of legal residency for tax purposes. The timeline below explains the most recent changes.
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- 2003: Earned income was taxed in the residence or domicile where it was earned
- 2009: Military Spouse Residency Relief Act – Earned income was taxed where military spouse maintains domicile – not where income was earned – when solely to be with service member in compliance with service member’s orders.
- 2018: Veterans Benefit and Transition Act – Earned income tax was taxed where military spouse maintains domicile or in service member’s domicile when solely to be with service member in compliance with service member’s orders.
- 2022: Veterans Auto and Education Improvement Act – Earned income may be taxed in service member’s state of domicile or residence, in the military spouse’s state of legal residency or domicile, or in the state where service member’s permanent duty station is located, when solely to be with service member in compliance with service member’s orders.
Maintaining your legal residence under MSRRA
Every person has a state of legal residence. For most civilians, their state of legal residence is the place where they live. But service members and their families move frequently. The SCRA allows active-duty military members to maintain their legal residence in the place they consider home.
The Military Spouses Residency Relief Act allows military spouses to declare the same state of legal residency as their spouse. The Veterans Benefits and Transition Act allows spouses to choose their service member’s state of legal residence even if they have not lived in that state. The following conditions must be met to qualify under the MSRRA:
- The service member is living on military orders in a state that is not his/her resident state.
- The spouse is in that state solely to live with the service member.
- Both the service member and spouse have the same resident state.
The spouse only pays taxes on income in their state of legal residency when they meet the above conditions.
The Veterans Auto and Education Improvement Act of 2022 further amended tax residency laws in the SCRA. This change allows military spouses and service members the option of maintaining residence in the civilian spouse’s home state. Spouses are also able to remain tied to a former legal residency even if they no longer reside there physically.
Using your spouse’s state of legal residence
Spouses vote and pay taxes in their state of legal residence, which they can choose to be the same as their service member’s state of legal residence.
Income covered by MSRRA
A military spouse’s income is subject to tax laws in their state of legal residence. SCRA only covers an active-duty service member’s military income, so any other income the service member earns is taxable by the state in which it is earned.
Military spouses and service members may be required to file and pay state income taxes on other income in the state where it is earned. This includes income from rental property.
Service members and spouses who own businesses should check with their legal and tax professionals. They can help determine if and how MSRRA and SCRA apply to their specific situations.
License Portability
The Veterans Auto and Education Improvement Act of 2022 added a new section called “Portability of Professional Licenses of Servicemembers and their Spouses” to the SCRA. The SCRA provision allows service members and their spouses to use their professional licenses and certificates when they must relocate due to military orders, as long as the service member:
- Has moved because of orders for military service
- Provides a copy of the military orders to the licensing authority in the new jurisdiction
- Has actively used the license or certificate during the two years immediately preceding the move
- Remains in good standing with the licensing authority that issued the covered license or certificate and every other licensing authority that issued a license or certificate valid for a similar scope of practice
- Submits to the authority of the licensing authority in the new jurisdiction for the purposes of standards of practice, discipline and fulfillment of any continuing education requirements
For more information
Access free legal assistance on your installation or call Military OneSource at 800-342-9647. You may also live chat 24/7/365. Military OneSource can help with other questions about MSRRA, SCRA or other residence, tax or voting issues. CONUS/International? View calling options.
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