The Military Spouse Residency Relief Act

The Military Spouse Residency Relief act (MSRRA) is another one of those benefits I found out about by accident. I was filling out my tax documents for my new job in North Carolina and it asked "Do you qualify for the MSRRA?". Since I had no idea what that was I turned to the internet. I asked my fellow wives in the USMC Aviation Officer Spouses Facebook group. These ladies always know everything from how to get an ink stain out of a flight suit to the emergency procedure for an F-18 engine fire. What I found most educational from the response was not what the MSRRA was, but rather how many spouses didn't accurately know what it was and how it worked. I got many responses that contradicted the advice of the person posting above them. They couldn't all be correct, so I read the fine print of the Act to educate myself. We as military spouses have to work together to accurately educate each other on these laws! There is no one out there that is going to explain it for us. If these laws exist and we don't know about them, what good are they? The MSRRA is one that you definitely want to know about! Knowledge is power; use it and you can save thousands.

The MSRRA was signed in 2009 as an amendment to the Servicemember's Civil Relief Act (SCRA). It allows spouses to maintain residency of their home state. This allows them to pay state income taxes to their home state instead of the state that they are earning the income in. This next part is the really important part: If you are a resident of an income tax-free state this means you do not have to pay state income tax! But be warned, there is a huge catch for some of us! Twenty-two states require you and your spouse to be a resident of the same state to qualify (listed below). This is important to know because if you PCS to an income tax-free state you should strongly consider becoming residents of that state. At least until your spouse gets out of the military. When I met my husband, we were both living in Florida (an income tax-free state). If I had known about this before we PCS'ed to North Carolina he could have easily become a resident of Florida before we left and I would be saving over $1,500/year in North Carolina state income tax. Instead, he is a resident of Washington State (another income tax-free state) and I am a resident of Florida I have to pay state income tax to North Carolina. That brings us to a tough question for military spouses. What does residency really mean?

Determining residency is tricky for service members and their spouses. A service member's home of record is the state that they enlisted from and is recorded as their State of Legal Residence (SLR). To change their SLR they must submit A DD form 2058 . Items that determine residency are:

1. Physical presence in the state

2. Registering to vote

3. Purchasing property

4. Registering/titling your vehicle

5. Notifying your previous state of residence of your change of state residency

6. Obtaining a drivers license in your new state

Physical presence is the key one! Everything else just validates your decision. For military families it is important to show intent to return if they are changing their state of residency. A great way to show intent to return in buying property. It is also a great form of passive income to rent your house out after you PCS again.

Same-State Rule States (24):

Alabama Arizona Colorado Connecticut Georgia

Hawaii Idaho Illinois Indiana Kentucky Maine Massachusetts Minnesota Mississippi Montana

Nebraska North Carolina Ohio Pennsylvania Oklahoma Rhode Island Utah Virginia

States that don't require "same state status" (17):

California Delaware Kansas Iowa Louisiana Maryland Michigan Missouri New Jersey New Mexico New York North Dakota Oregon South Carolina Vermont West Virginia Wisconsin