Military Spouses Residency Relief Act Published Jan. 6, 2010 By Capt. Jennifer M. Jameson Air Force Flight Test Center Legal Office EDWARDS AIR FORCE BASE,Calif. -- Under current federal law, a servicemember stationed in one state, who maintains residency in a different state, cannot be taxed on military income earned in the state where he or she is stationed. However, they can still be taxed by the state for non-military income earned in that state. A new law passed by Congress, the Military Spouses Residency Relief Act, affords spouses of active-duty military servicemembers similar income tax benefits that the servicemembers themselves enjoy. Previously, when a military spouse moved with his or her active duty spouse to a new state, the spouse would have become a resident of that new state and income earned there would be taxable by the state. However, this new law allows, but does not require, the spouse of the military member to keep his or her previous residency in certain situations. By so doing, the spouse pays taxes in the state where he or she formerly lived and maintains residency, and not where he or she is actually living with the servicemember. To avoid being taxed in the state where he or she is currently living, the spouse of the military member must, at a minimum, meet the following four factors: (1) The spouse of the military member must claim a state of residency that is different from the state where he or she resides with the servicemember. (2) the spouse must presently live in the state solely in order to live with the servicemember. (3) the servicemember must be present in the state in compliance with military orders. (4) the spouse and servicemember must both have the same state of residency. If the spouse meets these requirements, they are entitled to a refund of any taxes already paid to such state through withholding and estimated payments in 2009. The spouse will then pay tax to the state of legal residency for 2009, assuming that state has an income tax. Some important notes to keep in mind: · Like servicemembers themselves, spouses cannot choose their state of legal residency. · The spouse does not "inherit" the residency of the servicemember upon marriage. · State laws and regulations that are now being written will vary on what circumstances validate having established a residency in another state, and what proof is sufficient to show that it has been done. It is important to remember that under the new law, a spouse will still have to pay state income tax in the state where they currently live if they haven't already established residency there. The spouse may only claim his or her former residency for tax purposes if he or she first re-establishes legal residency and contacts in that state. For more information or to schedule an appointment with the legal office for advice on a particular situation, call 277-4310. (Editor's note: Capt.Thomas J. Alford, AFFTC Legal Office, contributed to this article)