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.
(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.
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.
For purposes of this section:
(1) Personal property
The term “personal property” means intangible and tangible property (including motor vehicles).
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.
Let me help you keep up-to-date on your military pay and benefits! Subscribe now for my newsy emails, which come about once every two weeks.