Husband is in the Military - Stationed in California

[Yardley CPA]

New client.  Married husband and wife who live in Philadelphia, PA.  Husband, who is in the military, was stationed in California for the entire year of 2017.   Husband's W2 reflects normal federal wages and withholdings but does not reflect any state wages or withholdings, no California wages, and no Pennsylvania wages.  It does have an FL for Florida, but no wages listed.  Obviously, Florida has no income tax.  With that said, this is my first military return and I want to make sure I'm not missing anything.  I assume his state wages should flow to his Pennsylvania income tax return along with his wife's wages??  Since he is military, he is not eligible for any special exclusions, is he?  Thank you. 

[easytax]

Can not speak for tax-ability of CA but for PA:  From section E, 1 of PENNSYLVANIA PERSONAL INCOME TAX GUIDE http://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Documents/pitguide_chapter_07.pdf

Full-time federal active duty military pay and federal active duty for training pay, including housing allowances, earned or received by a Pennsylvania resident member of the U.S. Armed Forces while serving outside the state is not taxable for Pennsylvania personal income tax purposes. However, a taxpayer must include such compensation when determining eligibility for tax forgiveness on PA-40 Schedule SP. While on federal active duty or federal active duty for training, any other income that the Pennsylvania resident earns, receives, or realizes remains taxable for Pennsylvania personal income tax purposes. The taxpayer has the burden of establishing that income received for military service outside the commonwealth was earned while on federal active duty. The Department of Revenue requires a copy of the military orders directing the taxpayer to federal active duty outside the commonwealth. Residents must file a Pennsylvania personal income tax return and include their W–2 form(s) and copies of their military orders as evidence of active duty military pay earned outside Pennsylvania.

[Yardley CPA]

Thanks very much!

 

[Hahn1040]

The W-2 indicates FL.  Thus, the service member has changed his state of residence to FL.  He no longer has a filing requirement for PA.  Active duty military can maintain residency in home state unless they take the steps to change it.  MANY military become residents of FL and TX while stationed in those states so that they do not pay state tax.  Of course, there are other states with no state tax (WA, NV, NH) and those that don't tax active duty when they are not stationed in the state.

PA does not tax the military pay but it would tax all other income.

FL has no tax, so no state tax at all.  If spouse is also a FL resident, then both would not be taxed by any state that they are stationed.

[easytax]

4 hours ago, Hahn1040 said:

The W-2 indicates FL.  Thus, the service member has changed his state of residence to FL.  He no longer has a filing requirement for PA.  Active duty military can maintain residency in home state unless they take the steps to change it.  MANY military become residents of FL and TX while stationed in those states so that they do not pay state tax.  Of course, there are other states with no state tax (WA, NV, NH) and those that don't tax active duty when they are not stationed in the state.

PA does not tax the military pay but it would tax all other income.

FL has no tax, so no state tax at all.  If spouse is also a FL resident, then both would not be taxed by any state that they are stationed.

Check what the domicile of the individual actually is. A W-2 stating FL does not mean anything. Facts and circumstances along with intent. There are specific things needing to be done to change domicile. It is not done easily.  Just ask someone trying to prove they moved from NY to anywhere else. NY wants all they can get and other states although not quite as stringent are moving that way.

[Catherine]

1 hour ago, easytax said:

moving that way

Massachusetts makes it *very* hard to change domicile.  Not as bad as NY, thankfully.

[bbstacker]

Please research the Military Spouses Residency Relief Act for additional information about taxation of military spouses.

The posted link may be useful to determine the service member's state for tax purposes.  I believe the Home of Record (HOR) is the determining factor for state taxation.  If the service member enlisted in Florida, they will be subject to Florida taxation (no state tax), no matter where they are stationed, unless he or she changed their HOR to a different state.

https://www.military.com/paycheck-chronicles/2015/02/27/residence-vs-home-record

[Possi]

We CAN trust the military W2 for HOR. If the military HOR is FL, no state tax return is done. If the same military taxpayer gets an extra job (which is not the usual military gig) in a state he/she happens to be living in, that particular income is subject to THAT state's taxes.

As far as the military spouse relief act goes, in order for the military spouse to claim the same HOR as the military taxpayer, they must have BOTH been residents of the HOR state when they began their married life together.

If they were not BOTH residents of say FL, (or the same state as HOR) then the spouse must file MFS tax returns in every state the spouse works in for as long as they are on this journey.

[easytax]

Disagree. HOR can be different from domicie and does not define state taxation. Regulations and facts of "domicle" define state taxaction.

[Terry D EA]

Had a situation like this a few years ago. Same scenario as the OP. I agree with easytax. Domicile is the important thing to determine. Again HOR and domicile are two different things. Look into CA domicile requirements as well.