Military Pay
Resident - If the taxpayer is a resident of North Carolina they are subject to North Carolina income tax on all income regardless of the source. This includes active duty military pay.
Nonresident - If the taxpayer is a nonresident of North Carolina stationed in North Carolina whose only source of income is active duty military pay, they are not required to file a North Carolina return.
One spouse is a resident of North Carolina 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 North Carolina resident but is a resident of another state, his or her spouse can elect to also be a resident of the other state.
North Carolina allows taxpayers to choose a married filing separately filing status even if they used married filing jointly on the federal return. To choose to file Married Filing Separately, from the North Carolina resident return menu select:
- Personal Information
- Filing Status - Select Married Filing Separately, indicate who the MFS return is for, and manually change all figures.
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 North Carolina, the following conditions must be met by the military spouse/employee:
- the servicemember is present in North Carolina in compliance with military orders,
- the spouse is in North Carolina solely to be with the servicemember, and
- the spouse is domiciled in the same state as the servicemember.
If the military spouse meets the eligibility requirements, they can avoid North Carolina state tax being withheld from their pay by providing their employer with Form NC-4EZ Employee's Withholding Allowance Certificate.
To claim a refund of taxes withheld from the North Carolina income in error, you'll need to adjust the wages pulling into the North Carolina return. To do this, from the North Carolina Nonresident Tax Return menu select:
- NC Taxable Income
- Total Income on Federal Return
- Wages - Adjust the wages to exclude the portion not being taxed in North Carolina.
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:
NC DOR: Armed Forces Information - Active Military
NC DOR: Individual Income Tax Instructions
NC DOR: Important Tax Information Regarding Spouses of United States Military Servicemembers