Military Pay
Resident - If the taxpayer is a resident of DC they are subject to DC income tax on all income regardless of the source. This includes active duty military pay no matter where it was earned.
Nonresident - If the taxpayer is a nonresident of DC stationed in DC and whose only source of income is active duty military pay, they are not required to file a DC return.
One spouse is a resident of Washington DC 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 DC resident as the primary taxpayer, and a DC resident return filed MFS for the taxpayer.
- Federal MFS return for the spouse, and a DC nonresident return for the spouse filing MFS. (The federal return won't be filed, only the DC return.)
The District of Columbia offers 4 filing status options:
- Married Filing Joint
- Married Filing Separately on the Same Return
- Registered Domestic Partners - Filing Jointly
- Registered Domestic Partners - Filing Separately on the Same Return.
To change the DC resident return filing status in TaxSlayer Pro, from the Washington DC Resident Menu select:
- Personal Information
- Filing Status - Select the desired filing status.
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 Washington DC, the following conditions must be met by the military spouse/employee:
- The servicemember’s legal residence for taxes is not in DC but the servicemember and spouse reside in DC due to military orders.
If the military spouse meets the eligibility requirements they can avoid Washington DC tax being withheld from their pay by providing their employer with a completed D-4 DC Withholding Allowance Certificate.
To claim a refund of taxes withheld from the Washington DC income in error, you'll need to complete form D-40B Nonresident Request for Refund. To complete this form in TaxSlayer Pro, from the Washington DC Nonresident Tax Return menu select:
- Subtractions
- Other Subtractions from Calculation B
- Military Spouse Residency Relief Act - Enter the allowable wages as a positive number.
Form D-40B cannot be electronically filed. It must be printed and mailed.
Note: This article discusses reporting military pay and military spouse pay in the TaxSlayer Pro program. It is not intended as tax advice.
Additional Information:
DC OTR: Individual forms and instructions
DC OTR: Notice 2009-13, Taxation of Compensation of Military Members and Spouses