Military Spouse Residency Relief Act (MSRRA)

As the spouse of an active service member, you know how the frequent relocations that come with military life can complicate a couple’s financial situation.

Traditionally, service members were allowed to claim residency in whichever state the couple considered home while their spouse was forced to become a resident of the state where they were living while the service member was stationed there.

The 2009 Military Spouses Residency Relief Act (MRSSA), passed as an expansion of the Servicemembers Civil Relief Act, changed all that. It simplified taxes, voting and residency for military spouses. Most importantly, spouses can claim the same home state residency as their servicemember, making their financial lives a lot easier.

Who Is Eligible?

Filing taxes while your spouse is deployed can be a time-consuming and expensive process.

To qualify for relief under the MRSSA as the spouse of a servicemember, you both must live where the servicemember is stationed. As a couple, you must have shared the same home-state residency before the servicemember relocated. In most cases, states require some physical presence, such as a fixed address or voter registration, to establish residency.

As the spouse of a servicemember, you can invoke the MSRRA if:

• You are living in a different state to be with your servicemember only while they are stationed there.
• You and your servicemember have designated your home state before your servicemember received their orders stationing them elsewhere.
• You pay taxes, vote, and perform other duties in the state where you’re declaring residency, not the state where you’re living on military orders.

How Does MSRRA Affect the Tax Filing Process?

By letting spouses and servicemembers declare the same home state for residency, the MSRRA simplifies and reduces the cost of filing taxes.

Before the MSRRA, the IRS forced spouses and service members to file taxes in two different states – the servicemember filed in the couple’s home state and the spouse filed in the state where the couple lived. In most cases, the couple had to file as “married but filing separately.” It was a situation that frequently created complications and more expense at tax time.

Under the MSRRA, couples can now file their taxes together in their home state as long as they have relocated under the servicemember’s orders. As of 2019, changes to the MSRRA let spouses file taxes using their servicemember’s residency even if they did not share that residency beforehand. (If they marry in the state where the servicemember is stationed, for example.)

It’s important to note that the MSRRA does not necessarily change a couple’s filing status — you may still have to file as “married but filing separately.”

In the event the servicemember is deployed abroad, the MSRRA allows the spouse to keep the home-state residency established before they relocated under orders.

Are State Income Taxes Affected?

Many states exempt servicemembers from paying taxes on income earned while they are stationed out of state. The same rules may not apply to spouses benefiting from the MSRRA, however. In that case, you will have to file and pay taxes to the state where you as a couple have declared home-state residency while stationed elsewhere – if your designated home state has state income taxes. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no state income taxes.

To guarantee state taxes are withheld correctly, servicemembers should file DD Form 2058 State of Legal Residence Certificate with the military.

Filing State Income Taxes

Servicemembers and spouses declaring residency in the 41 states (and the District of Columbia) that have state income taxes, should be alert for additional forms and documentation states may require to support residency.

Personal Property Taxes

Personal property, such as automobiles, that you own either alone or jointly with your servicemember are also covered under MSRRA. The personal property needs to be tied to your designated home state and taxed there. State law, not the MSRRA, determines whether you as a spouse need to get a driver’s license in the state where you are living rather than where you have declared residency.

Personal property comes in two forms: tangible and intangible.

Tangible personal property items can be touched, moved, and have a defined value. The list can include:

• Motor vehicles
• Boats and private airplanes
• Jewelry
• Machinery
• Electronics

Real estate is not considered tangible personal property because it cannot be moved.

Intangible personal property can include copyrights, patents, intellectual property, investments, digital assets, and similar material that can’t be touched. States have begun moving away from taxing personal property.

MSRRA and Unemployment

As a military spouse, you may be forced to give up your job to accompany your servicemember to a new posting. In that case, you may be eligible to file for unemployment benefits in your designated home state.

At this point, 46 states allow military spouses to file for unemployment benefits if they give up their job to join their servicemember spouse on station. The requirements for filing vary by state.

Four states – Idaho, Louisiana, North Dakota, and Ohio – still consider leaving a job to join a military spouse as voluntary unemployment and, therefore, do not pay unemployment benefits.

Informing the Spouse’s Employer

If you are planning to leave your job as part of your servicemember’s orders, you need to inform your employer that you are covered by the MSRRA as part of filing for unemployment benefits. You also must file new withholding paperwork with your employer to ensure your tax status is accurate. Otherwise, you’ll have to make quarterly tax payments to your designated home state to make up the difference.

Voting Under MSRRA

Under MSRRA, spouses remain residents of their designated home state rather than the state in which they and their servicemember are living. That means you can remain registered to vote in your home state and can vote absentee.

Spouses who adopt their servicemember’s home state may register and vote in that state.

Military Spouse Residency Relief Act Limitations

While the MSRRA offers a number of protections for military spouses relocating with their servicemember under orders, the act does have its restrictions. Those include:

• Spouses who do not relocate with their servicemember aren’t covered by MSRRA.
• Spouses and servicemembers must designate their home state before they relocate, not after.
• State law, not the MSRRA, sets the standard by which spouses and servicemembers can declare residency. Residency rules can include owning property, voting, or registering vehicles in the home state.
• State law, not the MSRRA, determines whether spouses must get a driver’s license from the state in which they are living with their servicemember.