Military Pay
Resident - Military income is excluded from taxation in Kentucky. To subtract military income in the Kentucky individual return, from the Kentucky return menu select:
- Subtractions From Income
- Enter Active Duty Military Pay - Enter the military pay as a positive number.
Nonresident - If the taxpayer is a nonresident of Kentucky stationed in Kentucky whose only source of income is active duty military pay, they are not required to file an Kentucky return.
One spouse is a resident of Kentucky 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 Kentucky resident, and an Kentucky resident return filed MFS for the taxpayer.
- Federal MFS return for the spouse, and an Kentucky nonresident return for the spouse. (The federal return won't be filed, only the Kentucky return.)
To change the Kentucky resident return filing status to Married Filing Separate returns, from the Kentucky Resident Menu select:
- Basic Information
- MFS Change Filing Status for State Purposes Only - Select Spouse and complete all applicable fields on the page before continuing out of the state 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 Kentucky, the following conditions must be met by the military spouse/employee:
- The active duty servicemember is present in Kentucky in compliance with military orders.
- The spouse is in Kentucky solely to be with the active duty servicemember.
- The spouse maintains residence in another state, which is the same state of residence as the servicemember.
If the military spouse meets the eligibility requirements, they can avoid Kentucky state tax from being withheld from their pay by providing their employer with (a) a current valid military identification, (b) a current Leave and Earnings Statement, and (c) Form K-4, Kentucky's Withholding Certificate
To claim a refund of taxes withheld from the Kentucky income in error, follow these steps from the Kentucky nonresident state return menu:
- Adjustments To Income
- Military Spouse Income - Select Yes in the menu under Are you a Military Spouse?, then enter the qualifying military spouse income included in the federal and Kentucky returns as appropriate.
Note: This is an article on reporting military pay and military spouse pay in the TaxSlayer ProWeb program. It is not intended as tax advice.
Additional Information:
KY DOR: Kentucky Form 740 Instructions