Military Spouses Residency Relief Act Modified
03/07/19
Author: ADP Admin/Monday, March 4, 2019/Categories: Compliance Corner
Military Spouses Residency Relief Act Modified
Overview: As of the tax year 2018, the Military Spouses Residency Relief Act (MSRRA) has been modified to allow military spouses to file state tax returns in their service member's home state whether they have ever lived there or not.
Details:
Background
The MSRRA, effective as of tax year 2019, changed the basic rules of taxation with respect to military spouses who earn income from services performed in a State in which the spouse is present with the Service member (SM) in compliance with military orders when that State is not the spouse's domicile (legal residence). Under these conditions, the spouse generally will not have to pay income taxes to the current State where income is earned. The spouse, however, would be required to pay income tax to the domiciliary State (assuming that State taxes wages).
However, the MSRRA does not allow a spouse to pick or chose a domicile in any State. Domicile is established, not arbitrarily chosen. The spouse must have actually been present in the State, established it as his or her domicile, and maintained it as such by forming and maintaining the necessary contacts. Similarly, the MSRRA does not allow a spouse to “inherit” or assume the military member's domicile upon marriage.
Veterans Benefits and Transition Act of 2018 (VBTA)
The VBTA modifies the MSRRA to allow military spouses simply to elect to have the same residence for state and local tax purposes, even if the spouse has never set foot in the service member’s home state. The factors previously used to determine the spouse’s legal residence – such as the spouse’s physical presence in a particular state or the identity of the state in which the spouse maintains a driver’s license, vehicle or voter registrations, or professional licenses – are no longer relevant.
The VBTA is part states as follows:
(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) Applicability.—The amendments made by subsection (a) shall apply with respect to any return of State or local income tax filed for any taxable year beginning with the taxable year that includes the date of the enactment of this Act.
For a copy of the VBTA please click on the link provided below:
https://www.congress.gov/bill/115th-congress/senate-bill/2248/text
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