Military Pay
Resident - If the taxpayer is a resident of California, they are subject to California income tax on all income regardless of the source. This includes active duty military pay.
Nonresident - If the taxpayer is a nonresident of California stationed in California whose only source of income is active duty military pay, they are not required to file a California return. Military members who are stationed outside of California under PCS orders are considered nonresidents of California for tax purposes.
To subtract military income in TaxSlayer Pro, from the Nonresident California Return menu select:
- Nonresident Income Allocation
- Total Income
- Wages & Salaries
- Active Duty Military Pay Subtraction - Enter the military wages earned while stationed outside of California as a positive number.
One spouse is a resident of California and the other is not - Generally, if the federal filing status is married filing joint, then the California return should also be married filing joint, however there are a couple of exceptions. The spouses can file separate returns if one is an active member of the United States armed forces or any auxiliary military branch during the tax year or one was a nonresident for the entire year. If they meet those qualifications, 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 California resident, and a California resident return filed MFS on different returns for the taxpayer. (This option is not yet available in TaxSlayer Pro when federal filing status is MFJ.)
- Federal MFS return for the spouse, and a California nonresident return for the spouse. (The federal return won't be filed, only the California return.)
To change the filing status to MFS, from the California 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 and select either taxpayer or spouse as the person filing the MFS return.
Note: Changing the filing status in the California Nonresident Return is not yet supported in TaxSlayer Pro.
Spouse Income - Military Spouses 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.
In order to be eligible for the income exemption under the MSRRA in California, the following conditions must be met by the military spouse/employee:
- The servicemember is in California on military orders.
- Is legally married to the spouse.
- The spouse is in California specifically to live with the servicemember.
If the military spouse meets the eligibility requirements, they can avoid California state tax from being withheld from their pay by providing their employer with an Employee’s Withholding Allowance Certificate.
To claim a refund of taxes withheld in error, from the California Nonresident Return menu select:
- Nonresident Income Allocation
- Total Income
- Wages & Salaries
- Subtractions using CA Law - Enter the wages to exclude from taxation in California.
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:
California FTB Forms & Publications - Search here for the following:
- Publication 1032 - Tax Information for Military Personnel
- Form 540 (Resident) Personal Income Tax Booklet
- Form 540NR (Nonesident/Part Year) Personal Income Tax Booklet
California Military Spouses Residency Relief Act FAQ
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.