Taxes, state of legal residence and the Military Spouse Residence Relief Act Published Oct. 13, 2011 By Capt. Justin D. Haselden U.S. Air Force Warfare Center Judge Advocate NELLIS AIR FORCE BASE, Nev. -- The military lifestyle demands that military members and their families be highly mobile. Every three years, if not less, they are asked to pick up and move to a different state or country. This creates a number of challenges that most civilian families do not have to face. Identifying a service member's state of legal residency is important when moving as often as military members do because that is where the military members and military spouses must pay state taxes. In bad economic times, many state tax authorities become more aggressive in an attempt to make up lost revenue. Misunderstanding the rules of legal residency can be an expensive mistake. As military members, only the state of legal residence, often referred to as "domicile," can tax a member's military income, while other income is taxed by the state in which it is earned. Federal and state law determines a service member's state of legal residence, which has nothing to do with a person's home of record. Federal law allows military members and spouses to keep their state of legal residence in situations where civilian families could not. State law determines when service members may become a legal resident of that state. As a rule of thumb, service members and their dependents need to be present in a state for around six months to become legal residents. These service members also must take certain actions that prove they and their families wish to make the chosen state their permanent home. To prove this, states look to many things, but some of the most important are registering to vote, getting a driver's license, registering a car or buying property in that state. Doing these things ensures that once the military member moves out of the state, there is still proof of intent to make that state the state of legal residence. A spouse does not gain the military member's legal residency simply by marrying the military member. For example, if a woman who lived in Georgia all her life married an Air Force member from Maine who was stationed in Georgia, the woman would not be a legal resident of Maine without moving to Maine and establishing residency according to Maine's law. However, if the military member wanted to become a Georgia legal resident, he could. Because he is physically in Georgia, he may take steps to acquire Georgia residency. Military spouses have different protections under the Military Spouse Residency Relief Act than service members have. Military spouses covered under the act may choose to become a legal resident of the state in which the military member is assigned, but will not be forced to do so by state law. Salary and wages military spouses make are only taxable by the individual's state of legal residence. However, this does not include money made renting property or owning a business. In order to retain the original state of legal residence, the spouse must meet three criteria. First, the spouse must reside in a state other than that of his or her legal residence. Second, the spouse must reside in that state solely to live with his or her spouse, the military member. Third, the military member must be under military orders in the new resident state. Both military members and spouses must maintain their legal residency to avoid becoming legal residents of the new state. (Note: some states may also require that a spouse have the same state of legal residence as the military member.) For example, if the Air Force member and spouse mentioned in the earlier example move to Nellis Air Force Base, the Air Force member may retain his new Georgia legal residency or become a Nevada legal resident. The service member, however, may not switch back to Maine because he has given up legal residence there. The spouse may keep her Georgia residence under the MSRRA. If she worked in Nevada, she would have to pay Georgia income tax. If she became a Nevada legal resident, she will not be able to switch back to Georgia legal residency unless she moves back to Georgia and goes through the steps to be a legal Georgia resident again. Spouses who fall under the MSRRA are not allowed to keep the status forever. There are a number of situations where a spouse would lose the protection of the relief act. For example, if the military member left military service, both the military member and spouse would be treated as regular civilians in regards to legal residency. Upon separation, both would ultimately become legal residents of the state they choose to live in once they met that state's residency requirement. Another example is if spouses choose to live in a state other than the one to which their spouse, the military member, moved to. These spouses also lose the protection of MSRRA. Finally, if a spouse takes an action that clearly establishes the new state as the state of legal residency, the spouse would become a legal resident of that state. These include things like filing a court action, accepting in-state tuition, voting or applying for benefits only available to legal residents. Any personnel who are concerned about their state of legal residence or any actions that may have caused them to give up their state of legal residency should contact the Nellis Justice Advocate Office at 652-5407. Nellis attorneys are available to answer these and any other legal questions installation service members have at the law center, located in Building 18 between the 99th Force Support Squadron and the 99th Air Base Wing headquarters. Walk-in hours are between 9:30 a.m. and 10:30 a.m. Mondays and 4 p.m. and 4:30 p.m. Thursdays.
