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2019 tax season: Spouses may now elect the service member’s legal residence for tax purposes

  • Published
  • 375th Air Mobility Wing Legal Office
SCOTT AIR FORCE BASE, Ill. --  

When a civilian spouse moves with an active duty member, the civilian spouse no longer needs to change their state residency or domicile thanks to the Military Spouse Residency Relief Act, or MSRRA.  

Before the MSRRA, civilian spouses were required to change their state of legal residence at each duty location. This affected several aspects of the civilian spouse’s life, including taxes and voting registration.  

The Servicemembers’ Civil Relief Act, or SCRA, provides military taxpayers with state income tax relief. The service member will not be taxed by multiple states or tax jurisdictions when the service member moves to a different state on account of military orders, which protects the service member from double taxation.  

Legislation enacted on Dec. 31 significantly broadens SCRA rights for civilian spouses concerning taxation. Section 302 of the Veterans Benefits and Transition Act of 2018 allows spouses to elect to use the same legal residence as the service member during any taxable year of the marriage.

This change will allow spouses to elect the legal residence of the service member when filing their 2019 tax return, even if the spouse never established physical presence (or had any other connection) to the state where the service member has legal residence or domicile.

The previous law required the civilian spouse to establish physical presence in the state, or have an intent to remain in the state permanently. Furthermore, the new law applies not only to state income tax but local taxes such as vehicle use tax.

Additionally, a civilian spouse can elect to choose the legal residence of the service member for purposes of voting. The law takes effect for voting registration after March 31. This change to the SCRA also applies retroactively to tax year 2018.

Please see your applicable state government website for further information on how to receive a refund on your 2018 tax returns. Moreover, you can check your state tax refund status through the Department of Revenue website for your state. You can find your state government website by visiting www.irs.com/articles/find-your-state-tax-refund.

Here are some examples to help explain the changes:  

SCRA Example: Capt. Bill Sanders is an active duty service member and maintains residency in Alaska. In 2017, while stationed at Scott AFB, he married a civilian attorney named Katie, who was from and maintained residency in Illinois.

Katie wants to elect to use her husband’s legal residence, Alaska, when filing their 2019 tax return. Prior to the new change in legislation, Katie would not have been able to elect Alaska for purposes of taxation. Katie would have had to pay Illinois state income tax.

However, subject to the recent change in law, Katie may elect to use the same residence for purposes of taxation as Captain Sanders regardless of the fact that she does not have any personal ties with Alaska.

Because Katie elected to use her husband’s legal residence, she would file her tax returns in Alaska. Going forward, Katie should be sure to notify her employer about her change in state of legal residence. Since Alaska does not have a state income tax, Katie would also potentially get a refund of Illinois taxes she paid in 2018.

Returns should be filed in Illinois. To make changes to a previously filed Form IL-1040, Katie must file Form IL-1040-X, Amended Individual Income Tax Return. Illinois Department of Revenue is reminding taxpayers that filing tax returns electronically and requesting direct deposit into a checking or savings account is still the fastest, most secure way to receive a refund.

MSRRA Example: Maj. Shelley Smith and her civilian spouse Bill Smith, a teacher at a local school, are legal residents of Illinois. Major Smith receives PCS orders relocating her from Scott AFB, IL to Hawaii. The couple moves to Hawaii only to comply with Major Smith’s military orders. Bill obtains a teaching job at a local high school in Hawaii. Under the MSRRA, neither Major Smith nor Bill are subject to Hawaii income tax on either Major Smith’s military compensation or Bill’s teaching income. They are taxed according to the rules of their home state (Illinois).

If you have more questions and qualify for legal assistance, please come to the legal office for support at 101 Heritage Drive (P3) Suite 210, Tuesdays and Thursdays from 9-10 a.m.