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 an California return. Military members who are stationed outside of California under PCS orders are considered non residents of California for tax purposes.
To subtract active duty military pay from the California nonresident tax return in TaxSlayer ProWeb, from the California tax 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. They can file separate returns if one of the taxpayers is an active member of the United States armed forces or any auxiliary military branch during the tax year or one of the taxpayers 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 an 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 an California nonresident return for the spouse. (The federal return won't be filed, only the California return.)
To change the California resident return filing status to MFS, from the California resident tax return 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.
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 from the California income in error, from the nonresident California menu select:
- Nonresident Income Allocation
- Total Income
- Wages & Salaries
- Subtractions using CA Law - Enter non military spouse income as a positive number.
Note: This is an article on reporting military pay and military spouse pay in TaxSlayer ProWeb. It is not intended as tax advice.
Additional Information:
California FTB Publications 1032 - Tax Information for Military Personnel