Not long ago, every time a service member and his or her family moved to another state, the spouse had to jump through the hoops of becoming a resident of that state. So when my husband was stationed in Georgia, because the state required it, I had to give up my driver’s license. We also had to title our vehicles in only my husband’s name since otherwise we would have had to pay a yearly ad valorem tax. And my wages were taxed by Georgia, too, even though my husband paid no tax and had no state income tax for his home of record, Texas.
But in 2009, a law was passed that changed all of that– the Military Spouse Residency Relief Act (MSRRA). The law provides protections to military spouses with regards to voting, taxation and property rights. But because we’re talking about taxation, the rules can be complicated and confusing and there are still plenty of spouses who may not be taking full advantage of all the benefits.
Here are the basics on how Military Spouse Residency Relief Act works and how it can help your family.
A working spouse may not have to pay state income tax. The MSRRA states that spouses don’t lose or acquire residence for tax purposes when they move as a result of military orders. However, and there’s a lot of confusion about this, there are some basic conditions that have to be met to be able to qualify for the Act’s protections.
- The service member and spouse have to have the same domicile. In other words, both must be residents of the same state.
- The service member and spouse are in a state only because of military orders.
- The service member and spouse reside in a state different than their state of domicile.
The thing that is tricky about this is that a spouse cannot pick and choose domicile freely. While the service member can fill out a form (DD Form 2058) to signify their home of record, a spouse must generally establish domicile rather than choose it and this is done by actually living in the state and maintaining contacts there. Each state can pick and choose the proof it requires for a spouse to prove domicile. Virginia, for example, required me to file a form each year proving my husband’s domicile and sending in a copy of my driver’s license and my last address in my state of domicile.
The Military Spouse Residency Relief Act also does not relieve spouses from having to pay taxes in their domicile state if that state does have income taxes. Some states may exempt military members from state income tax, but that protection does not automatically apply to the spouse, so it’s always wise to check.
And there is a fuzzy gray area regarding spouses who may work in a state that is different than the state where the service member is stationed (i.e., a spouse who works in Maryland, but the service member is stationed in Virginia).
Voting rights are protected. Spouses are protected just as service members are: they can vote via absentee ballot in their state of domicile or they can register to vote in the state where they are stationed.
Property rights are protected. Under the Act, residency requirements for property are suspended for spouses just like they are for active duty service members. And non-business personal property is exempt from taxation if it’s titled in the either the spouse’s name or jointly in the spouse and service member’s name. In my own case, I can now have my name on our car titles once again.
It’s important to note that the MSRRA doesn’t directly address the issue of whether a spouse may keep his or her driver’s license or be required to obtain a new one by a new state of residence since this is governed by state law.
Even though it’s been 5 years since the law was enacted, there continues to be a lot of confusion on the subject. And each state has interpreted the Military Spouse Residency Relief Act differently. There are several excellent articles online by military legal experts and taxation professionals but the best place to go with questions is probably your local legal assistance office. State departments of revenue can also be a valuable resource.
Familiarize yourself with this important Act that protects military spouses. If you are able to establish domicile in the same state as your spouse (something my husband and I were finally able to accomplish when we were stationed in Florida, the state where I grew up), you may find that you can save yourself quite a bit of money down the road.