Military Pay
Resident - If the taxpayer is a resident of Virginia they are subject to Virginia income tax on all income regardless of the source. While Virginia requires all military pay to be reported, they do offer a deduction of up to $15,000 if the servicemember's total basic military pay is less than $30,000. Virginia does limit the amount of the deduction if the total pay is more than $15,000 dollar for dollar for every dollar that goes over $15,000.
For example if the servicemember's total military pay is $17,000, the income is $2,000 over the limit. The total allowable deduction of $15,000 would be reduced by $2,000 leaving an allowable deduction of $13,000. Once their income reaches $30,000 the deduction has been reduced to $0.
To enter the allowable basic military income subtraction in the program, from the Virginia resident return menu, select:
- Subtractions From Income
- Other Subtractions
- Other Subtractions - Select Add Other Subtractions and Basic Military Pay and enter the allowable deduction as a positive number.
Nonresident - If the taxpayer is a nonresident of Virginia stationed in Virginia whose only source of income is active duty military pay, they are not required to file an Virginia return.
One spouse is a resident of Virginia 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 Virginia resident, and an Virginia resident return filed MFS for the taxpayer.
- Federal MFS return for the spouse, and an Virginia nonresident return for the spouse. (The federal return won't be filed, only the Virginia return.)
To change the Virginia resident return filing status to MFS, from the Virginia Resident Menu select:
- Personal Information
- Filing Status
- Married Filing Separately - Select Married Filing Separate and who the return is for. Complete all other applicable fields.
Spouse Income - Military Spouse 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.
To be eligible for the income exemption under the MSRRA in Virginia, the following conditions must be met by the military spouse/employee:
- The spouse is present in Virginia solely to be with their service member spouse who is permanently stationed in Virginia in compliance with military orders
- The income received by the spouse in Virginia is from wages or salaries earned as an employee, or is derived from certain limited self-employment.
If the military spouse meets the eligibility requirements they can avoid Virginia state tax being withheld from their pay by providing their employer with Form VA-4 Personal Exemption Worksheet.
To claim a refund of taxes withheld from the Virginia income in error, it will require two steps. Virginia allows taxpayers to electronically file the return, but they also require an additional form to be mailed in with proof of qualifications to allow the MSRRA subtraction. The first step to prepare the Virginia nonresident return will require the following steps:
- Income Subject to Tax
- Wages for Spouses of Military Personnel: Under the Service Member Civil Relief Act - Enter the qualified spouse wages as a positive number.
Then once you have completed the subtraction, select:
- Miscellaneous Forms
- VA Special Non-Resident Claim from (VA-763S)
- Entry 1 - Select who the form is for and select Military Spouse Exemption. Answer each applicable question.
- Military Spouse Exemptions Qualifications - Answer all applicable questions.
Once completed, this form will need to be printed and mailed with copies of the items the taxpayer is offering for proof of qualification. The mailing address can be found on the form itself.
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:
VA DOT: Virginia Members of the Military
VA DOT: Virginia Military Spouses Residency Relief Act FAQs