The Military Spouse Residency Relief Act (MSRRA) – Making Tax Time Easier for Military Families

Editor’s note: If you’ve been PCS-ing, cleaning more ACUs than you care to remember or couldn’t live without your FRG, (and you can decipher all that!) then this is for you. Here’s some tips on navigating the Military Spouse Residency Relief Act (MSRRA). 

Being a military spouse comes with a number of challenges. Perhaps the most difficult thing is coming to the realization that the military always comes first. Many military spouses understand this firsthand when they have to move to a new state, sometimes moving far from their hometown or giving up a promising career.

Relocating presents a unique set of challenges as well, including getting settled in your new area and finding a job. Until a few years ago, relocating to a new state also meant military spouses had to change their state residency. Thankfully, many military spouses don’t have to change their state residency anymore, thanks to the Military Spouse Residency Relief Act (MSRRA). This can make relocating a little easier, and possibly less expensive when you file taxes.

Prior to the MSRRA (which passed in 2009), military members could maintain their state residency when the military sent them to a new state, but spouses had to change their residency. This often caused service members and their spouses to fill out multiple tax forms and sometimes file their taxes as married filing separately.

The MSRRA streamlines the filing process by letting both the service member and the spouse keep the same state of residency, even after relocating to a new state (so long as they had to move under military orders).

Ex: The service member and their spouse both live in the state of Texas. If the military member has to move to California, both the military member and the spouse will maintain their residency in the state of Texas unless they change their residency with the military.

Both the service member and spouse must adhere to the tax laws in their state of residency. But because Texas does not have an income tax, neither person has to pay state income taxes. If they were residents of a state with income taxes, they would both have to pay those taxes to their state of residency, not to the new state they moved to.

If this applies to you, you’ll want to examine your situation to determine if it makes more sense to maintain your previous state of residency or change it with the military to your new state.

The MSRRA doesn’t let military members and spouses choose state residency in any state they wish. The residency must be established first, and the move must be made for military reasons. For tax years 2019 onward, a military member’s spouse may choose the military member’s residency even if the couple did not share the residency prior to the move.

As you might guess, there are some criteria you must meet to be eligible. The MSRRA only applies when:

• The spouse currently lives in a state different than their residency state.
• The spouse lives in the new state solely to be with the service member.
• The service member is in the state under military orders.

Also, the spouse can’t lose or get a new residence (for tax purposes) if they’re moving with the service member.

Other MSRRA rules

Those are the basics of how the MSRRA works, but there are a couple other things you should know about it.

First, remember that the MSRRA doesn’t necessarily affect your filing status. If you’re a military spouse covered by the Military Spouse Residency Relief Act, you’ll file your state return in your state of legal residence. However, your tax status in that state isn’t always the same as your service member spouse’s status.

Also, a state might exempt military income earned while the service member is out-of-state on military orders. However, the Military Spouse Residency Relief Act doesn’t automatically extend this exemption to a spouse.

The MSRRA can be a complicated law, and it’s been interpreted differently by the states. You can talk with one of our tax pros to help determine if the MSRRA applies to your situation. If it does, you could save a lot of time on your returns, and possibly a lot of money!