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Servicemember’s Civil Relief Act Text As It Applies To Spouses and Taxes

6 January 2022

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Over the years, there have been a number of federal laws trying to make life easier when it comes to military spouses and taxes. These laws have all been amendments to the Servicemember’s Civil Relief Act.

The Military Spouses Residency Relief Act

Passed in 2009 and amended in 2017, the Military Spouses Residency Relief Act allowed military spouses to retain their previous state of legal residence if it was the same state as their active duty service member. The later version had a provision that allowed military spouses to “borrow” their active duty service member’s state of legal residence for purposes of voting and taxation.

The Law Today

As of today, 17 January 2023, here’s where the law stands:

§4001. Residence for tax purposes
(a) Residence or domicile
(1) In general
A servicemember shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property, or income of the servicemember by reason of being absent or present in any tax jurisdiction of the United States solely in compliance with military orders.

(2) Spouses
(A) In general
A spouse of a servicemember shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property, or income of the spouse by reason of being absent or present in any tax jurisdiction of the United States solely to be with the servicemember in compliance with the servicemember’s military orders if the residence or domicile, as the case may be, is the same for the servicemember and the spouse.

(B) Election
For any taxable year of the marriage, the spouse of a servicemember may elect to use the same residence for purposes of taxation as the servicemember regardless of the date on which the marriage of the spouse and the servicemember occurred.

(b) Military service compensation
Compensation of a servicemember for military service shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the servicemember is not a resident or domiciliary of the jurisdiction in which the servicemember is serving in compliance with military orders.

(c) Income of a military spouse
Income for services performed by the spouse of a servicemember shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the spouse is not a resident or domiciliary of the jurisdiction in which the income is earned because the spouse is in the jurisdiction solely to be with the servicemember serving in compliance with military orders.

(d) Personal property
(1) Relief from personal property taxes
The personal property of a servicemember or the spouse of a servicemember shall not be deemed to be located or present in, or to have a situs for taxation in, the tax jurisdiction in which the servicemember is serving in compliance with military orders.

(2) Exception for property within member’s domicile or residence
This subsection applies to personal property or its use within any tax jurisdiction other than the servicemember’s or the spouse’s domicile or residence.

(3) Exception for property used in trade or business
This section does not prevent taxation by a tax jurisdiction with respect to personal property used in or arising from a trade or business, if it has jurisdiction.

(4) Relationship to law of State of domicile
Eligibility for relief from personal property taxes under this subsection is not contingent on whether or not such taxes are paid to the State of domicile.

(e) Increase of tax liability
A tax jurisdiction may not use the military compensation of a nonresident servicemember to increase the tax liability imposed on other income earned by the nonresident servicemember or spouse subject to tax by the jurisdiction.

(f) Federal Indian reservations
An Indian servicemember whose legal residence or domicile is a Federal Indian reservation shall be taxed by the laws applicable to Federal Indian reservations and not the State where the reservation is located.

(g) Definitions
For purposes of this section:

(1) Personal property
The term “personal property” means intangible and tangible property (including motor vehicles).

(2) Taxation
The term “taxation” includes licenses, fees, or excises imposed with respect to motor vehicles and their use, if the license, fee, or excise is paid by the servicemember in the servicemember’s State of domicile or residence.

(3) Tax jurisdiction
The term “tax jurisdiction” means a State or a political subdivision of a State.

What This Legislation Does Not Do

As with any legislation, this does do many of the things people think that it does. Or would like it to do.

There is no provision for military spouses who remain at an old duty station while their service member moves ahead. They lose protections when their service member PCSes.

There’s no protection for military spouses to be able to keep the things that demonstrate intent to maintain a legal residence, such as voter registration, driver’s licenses, and vehicle registrations. State law may still require them to move those things to the place where they are actually living. This then makes it difficult to prove legal residence in the old state.

 

 

 

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7 Comments
Filed Under: Spouse Careers, Taxes

Comments

  1. Cody says

    28 January 2016 at 5:53 pm

    I’m a Marine Corps veteran with Texas residency, and my wife is a Marine stationed in California.

    Do I need a CA drivers license to work in California? Also do I need to change residency to work in California or to get a California license?

    I’m trying to get a job and they told me I’ll need a CA drivers license.

    And my concern is I don’t want to change residency.

    Also for Filing Taxes and I have been working in California would it be filed through California or though my residency in Texas?

    Reply
    • Kate Horrell says

      1 February 2016 at 9:23 am

      Cody, California law does not require you to get a California driver’s license. However, a job may require that you get a California driver’s license, and they are permitted to do that.

      Driver’s licenses are only one indicator of your residency. If you maintain all the other items in Texas, and your wife is a legal resident of Texas, then your right to remain a Texas resident is protected under the Military Spouses Residency Relief Act. If your wife is not a legal resident of Texas, then you are dealing with state laws. California is the 2nd most likely state to pursue you if they think that you should, in fact, be a California resident. If you can not claim the protections of the MSRRA because your do not share a state of legal residence with your active duty spouse, then you are probably going to have to become a California resident.

      I hope this answers your questions. I know it is confusing and complicated.

      Good luck to you!

      Reply
      • Paul bertholf says

        6 May 2016 at 6:45 am

        My wife is a resident of Louisiana and I am a resident of Florida. When we do federal income tax we will file married filing joint. My wife still needs to pay LA income tax although she no longer works and makes a little bit on investments. LA makes you file as you did on your federal tax return. In this case they will tax her based on our combined income less deductions as LA looks at it as community property. We have no problem with paying the tax. The problem is tax withholding. Our admin will not change my state without me proving I am a resident of LA. We are stationed in NC and I am deployed. No way for me to prove residency in L A. Can you point me in the right direction?

        Reply
        • Kate Horrell says

          15 May 2016 at 7:23 pm

          Paul, there are a couple of issues here. I don’t see any evidence that you’re a resident of Louisiana, so I understand why your admin won’t change it. Why would you WANT to be a resident of Louisiana? I don’t see any benefit to you, it wouldn’t be accurate, and it will probably increase your income tax bill.

          If the idea is to pay taxes so you aren’t penalized, you can do this through quarterly estimated payments.

          Reply
  2. Kirsten Workman says

    25 September 2018 at 10:41 pm

    Hello!
    Could you help me with this question? My active husband and I are TX residents. He is stationed in Kansas. We own a home here, and rent out our home in TX. If we decide to sell our home in TX, let’s say, a year before he retires, will we lose our TX residency status? When we update our voter registration, driver’s licenses and vehicle registration, we always have to provide both a TX address and a current mailing address. I worry that if we sell our TX home, do we lose our TX residency status. If that is the case, how much time do we have to transition over to Kansas residency. Thank you for any help!

    Reply
    • Kate Horrell says

      26 September 2018 at 10:13 pm

      There is no single factor that determines residency. In general, the major indicators of residency are voter registration (and actually voting), maintaining vehicle registration, and maintaining driver’s licenses. Home ownership typically only comes in to play if you claim a homestead exemption in a state that is not where you claim your legal residence. From the information you’ve provided, there’s no reason to believe you would lose your Texas residency solely based upon selling your Texas home. (Note: not a lawyer, but this one seems pretty clear.)

      Reply
  3. Crazy Husband says

    19 December 2019 at 8:20 pm

    This is great info! Getting a divorce and trying to flee domestic violence of my x-military spouse. The crap is hitting the fan. We lived a short stint in Mississippi & worked there for 3 months. Born in Cali and lived there a bit on and off. Was kidnapped and hauled into Arizona. Work in Idaho remotely. I have family in Washington. Can’t stay in Utah. Divorce proceedings and custody eval expected here. I need to get the eval switched to somewhere safer. I saw you had mentioned Cali as being the #2 grippiest state. I am looking into UUCJEA with protective order stuff. I’m aSo considering Chicago with friends there. I want a state eager to protect kids and to take us. My big questions:

    1) Can I reclaim Mississippi if we lived there together long ago then moved with orders to Utah and stayed here after he left the military? From here to begin. The highlighted blue part says the domicile must be the same…but I don’t know if this means that I can claim Mississippi because we lived together there then in Utah and basically did most all here. I would sure like to move back there.

    2) What states are grippy with residency? You said Cali is 2nd most grippy (like this as I was born here). What’s #1 and other major ones?

    Reply

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WELCOME!

Hi! I'm Kate! Accredited Financial Counselor®, Navy spouse, and mom of four.

Here at the blog, I talk about the financial issues that affect military families - pay, allowances, and benefits. Plus college stuff, landlording, moving, taxes. We cover a little bit of everything.

My goal is to give you the tools to make the best decisions right now, so you'll be confidently prepared for whatever comes next - whether that's a PCS move, transition to civilian life, or retirement.

So grab a cup of coffee, tea, or whatever makes you happy, and let's get to know each other.

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