Virginia Military Basic Pay Deduction
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, the servicemember/taxpayer can deduct up to $15,000 if their total basic military pay is less than $30,000. The deduction is limited 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 TaxSlayer ProWeb, from the resident Virginia Return menu select:
- Subtractions From Income
- Other Subtractions
- Other Subtractions - From the Subtraction dropdown menu, select Basic Military Pay and enter the allowable deduction as a positive number.
Combat and Hazardous Duty Pay Subtraction
Military personnel on active duty service in a combat zone or a qualified hazardous duty area may subtract their combat or hazardous duty pay from their Virginia taxable income. This subtraction is allowed only for the pay that was included in their federal adjusted gross income, and not otherwise subtracted, deducted, or exempted elsewhere.
Combat pay reported on Form W-2 with Box 12 code Q is excluded from federal adjusted gross income and thus may not be subtracted on the Virginia return.
To enter the combat and hazardous duty pay subtraction in ProWeb, from the resident Virginia Return menu select:
- Subtractions From Income
- Other Subtractions
- Other Subtractions - From the Subtraction dropdown menu, select Military Pay Attributable to Active Duty in Combat Zone and enter the allowable deduction as a positive number.
Virginia National Guard Exemption
Virginia National Guard members that hold rank of O6 or below may qualify to deduct a portion of National Guard pay from their Virginia taxable income. This deduction applies to both active an inactive duty pay and is limited to the lesser of $5,500 or the amount earned from up to 39 calendar days of service.
To enter the Virginia National Guard subtraction in ProWeb, from the resident Virginia Return menu select:
- Subtractions From Income
- Other Subtractions
- Other Subtractions - From the Subtraction dropdown menu, select Virginia National Guard Income and enter the allowable deduction as a positive number.
Nonresident Virginia Military Pay
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 a Virginia return.
Only One Spouse is a Virginia Resident
If only one spouse is a Virginia resident, 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 a Virginia resident return filed MFS for the taxpayer.
- Federal MFS return for the spouse, and a 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 in ProWeb, from the resident Virginia Return 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 derived from certain limited self-employment.
Virginia Military Spouse Tax Exemption Form
If the military spouse meets the eligibility requirements, the taxpayer 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, Virginia requires Form 763-S, Virginia Special Nonresident Claim for Individual Income Tax Withheld. This form is supported in the software; however, it is not accepted electronically and must be printed and mailed.
Before completing Form 763-S, first indicate the spouse's wages subject to MSRRA. From the nonresident Virginia Return in ProWeb select:
- 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.
Next, return to the main Virginia Return menu and select:
- Miscellaneous Forms
- VA Special Non-Resident Claim from (VA-763S)
- Taxpayer Special Nonresident Claim or Spouse Special Nonresident Claim as appropriate.
- Exemption Category - In the Select Exemption Category dropdown menu select Military Spouse Exemption, then click Continue.
- Resident of a State with Individual Income Tax - Select Yes or No as appropriate.
- Amended Claim - If this is an amended Form 763-S, select Yes.
- Military Spouse Exemptions Qualifications - Answer all applicable questions.
Note: Once completed, Form 763-S 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.
Additional Information:
VA DOT: Members of the Military
VA DOT: Resident Individual Income Tax Booklet
VA DOT: Nonresident Individual Income Tax Instructions
TaxSlayer Pro strives to keep the information on this page timely and accurate but makes no promise or guarantee about the timeliness, accuracy, or completeness of the contents of this page. This is general information and is not intended to be tax advice. You are encouraged to also review the underlying state resources and publications.