Military Pay
Resident - If the taxpayer is a resident of Hawaii they are subject to Hawaii income tax on all income regardless of the source. This includes active duty military pay.
Taxpayers may a portion of their military reserve or Hawaii National Guard duty pay from their income, effective for taxable years beginning after December 31, 2021. (Act 197, SLH 2004)
Nonresident - If the taxpayer is a nonresident of Hawaii stationed in Hawaii whose only source of income is active duty military pay, they are not required to file a Hawaii return.
One spouse is a resident of Hawaii and the other is not - A servicemember’s spouse may elect, for income tax purposes, to use the same state of residence as the servicemember. If a servicemember is not a Hawaii resident, and is instead a resident of another state, his or her spouse can elect to also be a resident of that state and not a resident of Hawaii .
Hawaii allows taxpayers to file MFS even when they have filed joint on their federal return. To change the filing status to MFS, from the Hawaii Resident Tax Return return select:
- Basic Information
- Change Filing Status from MFJ to MFS for State purposes only - Select Yes.
- MFS for State purposes only - Select who the return is for and enter all the information that applies.
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 Hawaii , the following conditions must be met by the military spouse/employee:
- The servicemember (as defined in 10 U.S.C. §101(a)(5)) is present in Hawaii solely in compliance with military or naval orders; and
- The spouse is in Hawaii solely to be with the servicemember.
If the military spouse meets the eligibility requirements, they can avoid Hawaii state tax from being withheld from their pay by providing their employer with a Hawaii Employee's Withholding Allowance and Status Certificate.
To claim a refund of taxes withheld from the Hawaii income in error, from the nonresident Hawaii Tax Return menu select:
First, indicate in the return header the MSRRA exemption, from the nonresident Hawaii Return menu select:
- Basic Information
- Military Spouses Residency Relief Act - Select and answer Yes.
Second, enter the wage adjustment, from the nonresident Hawaii Return menu select:
- Hawaii AGI
- Wages, Salaries, Tips, etc.
- Adjustments to State Wages (+/-) - Enter the spouse wages as a negative number.
Per the N-15 instructions, in addition to the taxpayer's and spouse's W-2s, a return taking the MSRRA exemption must have the following documentation attached:
- The servicemember’s military or naval orders assigning the servicemember to a post of duty in Hawaii;
- A valid, unexpired military spouse identification card that identifies the card-holder as a spouse and not merely a dependent; and
- The servicemember’s Leave and Earnings Statement indicating that the servicemember’s legal residence for purposes of withholding state income taxes from military pay is a state other than Hawaii.
TaxSlayer Pro does not yet provide a PDF attachment point for this documentation, thus a return claiming the MSRRA exemption cannot be electronically filed in TaxSlayer ProWeb.
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:
HI DOT: Tax Forms and Instructions
HI DOT: Tax Information Release No. 2010-01
HI DOT: Tax Information Release No. 2019-01
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.