Do You Pay State Taxes While Deployed?

Military personnel often face unique state tax obligations, particularly when deployed or stationed away from their home. Understanding these complexities is important for ensuring compliance and optimizing financial situations. Federal provisions accommodate the transient nature of military service, making their tax rules distinct from civilians.

Understanding Your State of Domicile

Your “domicile” is a fundamental concept in determining state tax liability for military personnel, differing from mere physical residency. Domicile refers to the state you consider your true and permanent home, where you intend to return after service. You can only have one domicile, even if you reside in multiple locations throughout your career.

Establishing domicile involves demonstrating an intent to return to that state. This intent is evidenced by actions such as voter registration, vehicle registration, maintaining a driver’s license, owning property, or filing state tax returns. Simply being stationed in a state does not automatically change your domicile. The Servicemembers Civil Relief Act (SCRA) protects a service member’s domicile from being changed solely due to military orders.

For military members, the state of domicile is crucial because it dictates where their military income is subject to state income tax. Your tax obligations for military pay typically remain tied to your state of domicile, regardless of assignments. Changing your domicile requires both physical presence in a new state and a clear intent to abandon your old domicile permanently.

State Tax Rules for Military Income

The state of domicile governs how a service member’s military income is taxed. Under the Servicemembers Civil Relief Act (SCRA), military income is taxable only by the service member’s state of domicile, regardless of where they are deployed or stationed. This federal protection prevents multiple states from taxing the same military earnings.

States vary in how they treat military income for tax purposes. Some states do not impose state income tax, meaning military pay is not subject to state income tax. Other states may tax all military income, while many offer partial or full exemptions, such as for combat zone pay. Service members should verify their domicile state’s specific rules, as tax laws can change.

Taxation for Military Spouses and Other Income

State tax obligations can differ for military spouses and non-military income sources. The Military Spouses Residency Relief Act (MSRRA) provides protections for military spouses, allowing them to maintain their domicile for tax purposes, often aligning with the service member’s. This means a military spouse does not acquire a new domicile simply by accompanying a service member to a new duty station. Since 2019, a military spouse may even choose the service member’s residency.

While military pay is typically taxed only by the state of domicile, income from civilian jobs, investments, or other non-military sources may be treated differently. This non-military income can be subject to taxation by the state where it is earned, regardless of the service member’s or spouse’s domicile. For example, if a military spouse works a civilian job in the state where the service member is stationed, that income may be taxable by that state, even if their domicile is elsewhere.

Filing Your State Tax Return

When filing state tax returns, service members and their families should consider their domicile and income sources. Your Leave and Earnings Statement (LES) indicates the state you claim as your legal resident. If your domicile state has an income tax, you will file a resident return with that state, regardless of your physical location.

If you earned non-military income in a state different from your domicile, you may need to file a non-resident return in that state. For example, if a military spouse works a civilian job in the state where the service member is stationed, that income is reported to the state where it was earned. If you incorrectly paid taxes to the wrong state, you may need to amend your tax return. Resources like MilTax or legal assistance offices can provide guidance.