Military state of legal residence & spouse.

[Opfor77]

Taxpayer is military, spouse is non military.  Taxpayer state of legal residence is Georgia, but is stationed in North Carolina.  Taxpayer was already in the military in NC when spouse married him.  Spouse is from Tennessee, now living in NC.  Taxpayer must file a GA return.  Question:  can the spouse keep TN as state of legal residence, while living in NC, or must she use GA like taxpayer?

[Marsha2020]

If she is living and working in North Carolina and married to active duty, she can file with spouse with GA.  TN would be completely out of the question.  I think she can also file North Carolina and not Georgia if it's more advantageous.  

[mm1]

The Military Spouses Residence Relief Act requires the spouse of an active duty Military member to become a resident of the same state as the Military member and it does not matter when they were married during the year. They would file a joint return in the State of GA where the military member joined as his state of residency. They would not pay NC taxes because NC follows the MSRRA guidelines. They would not file a NC return unless spouse had NC withholding erroneously withheld to get refunded. MSRRA requires the spouse to maintain the same legal residence as the military member so spouse is a GA resident upon marriage. If the spouse does not live with the military member and has a physical presence in another state then MSRRA does not apply but that does not sound like your case. Spouse, in your case, lives with the taxpayer in NC so cannot meet the TN residency requirement. Therefore, they only file a GA return and report all income to the State of GA as though married full year. If they have income property such as a rental property in TN, then they would file and pay tax on that income only in TN.

[sjrcpa]

"The Military Spouses Residence Relief Act requires the spouse of an active duty Military member to become a resident of the same state as the Military member"

I don't think this is required. I think the nonmilitray spouse can choose to be a resident of the same state as the military spouse.

[Marsha2020]

What you can't do under the MSRRA

Of course, there are limitations to this law, as you might expect. And remember, these vary state to state, so do your specific state research.

You cannot choose a random state to be your residence. You also can’t “adopt” your service member’s state without having lived there. If a state exempts military income while the service member is on orders, that is not automatically extended to income earned by the military spouse. Also, you have to be able to prove that you have lived there. It’s all clear as mud, right?

See above. Don’t think it’s cut and dried. 

[rbynaker]

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@Marsha2020 wrote:

What you can't do under the MSRRA

Of course, there are limitations to this law, as you might expect. And remember, these vary state to state, so do your specific state research.

You cannot choose a random state to be your residence. You also can’t “adopt” your service member’s state without having lived there. If a state exempts military income while the service member is on orders, that is not automatically extended to income earned by the military spouse. Also, you have to be able to prove that you have lived there. It’s all clear as mud, right?

See above. Don’t think it’s cut and dried. 

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That's correct as long as we don't look beyond MSRRA.  But then the rules changed (again) with the Veterans Benefits and Transition Act of 2018.  Now the spouse of a servicemember may elect to use the same residence for state tax purposes as that of the servicemember.  Best I can tell, they get to do so retroactively to the beginning of the year married.

https://www.govinfo.gov/content/pkg/PLAW-115publ407/pdf/PLAW-115publ407.pdf

Are we having fun yet?

[Opfor77]

Thank you for the input...still "clear as mud though".  

[mm1]

Google "The Military Spouses Residency Relief Act" and choose the Military One Source article dated 11-8-2021. This is what the Military gives their members. That article explains it pretty clearly on a 2-page read. Page 2, under What MSRRA does not do, 1st sentence says "MSRRA does not permit military spouses to maintain a legal residence in a state different than their active-duty service members." It also addresses if the spouse actually lives in a different state than the active duty member in a statement under the same heading - MSRRA does not apply. 

Maybe that will help clarify things a bit for you. 

[PCarawanCPA]

I have a couple (State of Residency for military Alaska - no return), spouse worked in Virginia and had state w/h and received military retirement and withheld Virginia.  Taxpayer still active military.  

They have a $55K Capital gain on sale of rental property in Virginia.  How do I file both a 763 S for earned income and a non resident return for capital gain?  Do I leave earned income off of Non-resident return and attach 763-S for earned income?