Military Pay
Resident - If the taxpayer is a resident of Vermont, they are subject to Vermont income tax on all income regardless of the source. This includes active duty military pay.
There is an exception to this rule for resident active duty taxpayers who are stationed outside of Vermont during the tax year. The military income earned while serving outside of Vermont can be subtracted from income on the Vermont resident return.
To subtract this income in ProWeb, from the Vermont Resident Return menu select:
- Subtractions From Income
- Military Pay (IN-113) - Enter the allowable income as a positive number.
- Number of Months on Active Duty for Military Pay Subtraction (IN-113)
Nonresident - If the taxpayer is a nonresident of Vermont stationed in Vermont whose only source of income is active duty military pay, they are not required to file a Vermont return.
One spouse is a resident of Vermont 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 Vermont resident but is a resident of another state, his or her spouse can elect to also be a resident of the other state.
Vermont 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 in ProWeb, from the Vermont Resident Return menu select:
- Basic Information
- Change Filing Status from MFJ to MFS for State purposes only - Select Married Filing Separately.
- Married Filing Separate for State purposes only - Select 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 a Vermont, the following conditions must be met by the military spouse/employee:
- The spouse is a servicemember.
- The spouse of the servicemember was a nonresident of Vermont prior to military orders.
- The spouse of the servicemember was only located in Vermont because the servicemember was complying with military orders.
If the military spouse meets the eligibility requirements, they can avoid Vermont state tax from being withheld from their pay by providing their employer with Form W-4VT Employee’s Withholding Allowance Certificate.
To claim a refund of taxes withheld from the Vermont income in error in ProWeb, from the Nonresident Vermont Return menu select:
- Income Subject to Tax
- Enter the amount of Vermont wages to exclude - Enter the allowable wages 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:
VT DOT: Tax Guide for Military
VT DOT: Income Tax Return Booklet
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.