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Military spouses tax relief act permits some tax exemptions

By Lance Cpl. Gregory Aalto | | March 25, 2010

Military spouses can now seek the same permanent residency status as their spouse and have their income taxed only by their state of permanent residence, according to a recent law.

Signed Nov. 11, 2009, the Military Spouses Residency Relief Act clarifies state tax law for military spouses living away from their home because of their loved one’s military orders.

A military spouse who lives with a service member in a particular state under military orders does not have to pay state income tax on wages earned in that state as long as that state is not also the spouse’s home of record.

However, the spouse would have to pay taxes to the state of residence, if the laws of that state required.

“Any state with lower income taxes or none at all usually is a better option for someone completing their taxes,” said Lance Cpl. Robert Fletcher, station tax preparation specialist.

For some spouses however, this might not be as beneficial, since some states require the spouse and the service member to file a joint tax return, which causes some income to become taxable in both states. If the service member is from a state with no income tax, this would be extremely beneficial, according to the tax center’s brief on the law.

For Arizona, an employee who works here is exempt from Arizona income tax withholding provided the following three requirements are met: a spouse is a member of the armed forces present in Arizona in compliance with military orders; a service member is present in Arizona solely to be with his or her spouse; and a spouse maintains residence in another state, which is the same state as their spouse.

The law does not allow a spouse to pick or chose a domicile in any state. Domicile is established, not chosen. The spouse must have actually been present in the state, established it as his or her domicile and maintained it by forming and maintaining the necessary contacts, such as registering to vote, owning property, registering vehicles or holding professional licenses.

Similarly, the law does not allow a spouse to inherit or assume the service member’s domicile upon marriage without the necessary contacts with the state.

More information is also available at www.militaryonesource.com/taxfilingservices under the heading “Find out about the Military Spouses Residency Relief Act.”

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