On November 11, 2009, President Obama signed the Military Spouses Residency Relief Act into law. This new law allows military spouses to retain their state of residence when relocating with their spouse who is stationed for military duty.
Under this act, the military spouse will only be responsible for state and local taxes in their home state where they maintain residency.
No More Dual Residency
Military service members were already provided relief from state residency and tax obligations while stationed for duty under the Servicemembers Civil Relief Act (SCRA). However, this act did not include spouses. This left many families with dual residency. The military personnel had residency in the home state while their spouse had residency in the state of military service. Therefore, they would have to file and pay taxes in two states. This new law (which amends the SCRA), extends this same state residency and tax relief to service member’s spouses, ending this problem for military families.
No More Paycheck Withholdings
People who qualify under this law are exempt from state taxation outside of their home state; therefore, they are also exempt from state paycheck withholdings. Many states have revised their withholding forms to include an exemption option specifically for military spouses. You can file these forms with your employer to stop unnecessary withholdings. If you have had tax withheld from your paycheck by the state, you will have to file a 2009 state tax return to receive a refund of those amounts.
Could I Still Be Considered a Resident?
This act does not change state regulations for establishing and proving legal residency, for which each state has its own separate rules. If you have registered to vote, obtained a driver’s license, or purchased a home you could be a resident despite this new federal law. In addition, if you have already established legal residency, the law does not say that you can change back to a former state of residency. Those concerned with these types of issues should contact their state Department of Revenue/Taxation to determine if they do in fact qualify as a non-resident military spouse.
When Is It Effective?
The Military Spouse Residency Relief Act is effective for taxable year 2009 and thereafter, and applies regardless of the date of the military or naval order concerned.