Military Pay
Resident - If the taxpayer is a resident of Alabama, they are subject to Alabama income tax on all income regardless of the source. This includes active duty military pay no matter where it was earned.
Nonresident - If the taxpayer is a nonresident of Alabama stationed in Alabama whose only source of income is active duty military pay, they are not required to file an Alabama return.
One spouse is a resident of Alabama and the other is not - They can file separate state returns, one as a resident and the other as a nonresident. To accomplish this you'll need to prepare two tax returns:
- Federal MFJ return with the primary taxpayer being the Alabama resident, and an Alabama resident return filed MFS for the taxpayer.
- Federal MFS return for the spouse, and an Alabama nonresident return for the spouse. (The federal return won't be filed, only the Alabama return.)
To change the Alabama resident return filing status in TaxSlayer Pro, from the Alabama Resident Menu select:
- Basic Information / General Information
- Filing Status
- Married Filing Separately - Click OK to confirm, then YES to pulling information for the MFS allocation.
Spouse Income - Military Spouse Residency Relief Act (MSRRA)
The MSRRA allows military spouses who reside with their service member spouse stationed in a nonresident state on military orders to keep their resident state for tax purposes. This means if the spouse has income from the nonresident state, they are not required to pay taxes to the nonresident state but report this income on their resident state return.
To be eligible for the income exemption under the MSRRA in Alabama, the following conditions must be met by the military spouse/employee:
- The employee’s spouse is a military service member.
- The employee is NOT a military service member.
- The military service member spouse has a current military order assigning him or her to a military location in Alabama.
- The employee and military servicemember reside at the same address.
- The employee’s domicile state is a state other than Alabama.
- The employee’s and military service member’s domicile is the same.
- The employee is present in Alabama solely to be with the military service member spouse.
If the military spouse meets the eligibility requirements they can avoid Alabama state tax being withheld from their pay by providing their employer with the Alabama Form A4-MS, Nonresident Military Spouse Withholding Tax Exemption Certificate.
Note that if the spouse's Alabama employer withheld tax in error, the W-2 entry in the spouse's separate tax return will need to be modified, removing the state wages in Box 16 but leaving the state withholdings in Box 17.
Note: This is an article on reporting military pay and military spouse pay in the TaxSlayer Pro program. It is not intended as tax advice.
Additional Information:
AL DOR: Forms and Instructions
AL DOR: Nonresident Military Spouse Withholding Exemption Certificate
Military Spouses Residency Relief Act
While TaxSlayer Pro strives to make the information and links contained on this page as timely and accurate as possible, TaxSlayer Pro makes no promise or guarantee about the timeliness, accuracy or completeness of the contents of this page. The information contained on this page is for general information and is not intended to be tax advice. The user is also encouraged to review the underlying state resources and publications.