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State Residency of military spouse.

Forum|Forum|2 years ago
March 11, 2024
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Military taxpayer stationed in Virginia has a "home of record" in Georgia. Taxpayer files a Georgia Tax Return as a full year Georgia Resident. Taxpayer marries a South Carolina resident in April of the tax year. Does the newly-wed military spouse file as a Full-year Georgia Resident under the Military Spouse Residency Relief Act? Or does she file as a 9-month Part-Year Georgia Resident and as a 3-month Part Year South Carolina resident?

Best answer by DMarkM1

Assuming the SC spouse had SC taxes withheld then a part-year return will need to be filed in SC. Since SC law says whatever filing status you use on your federal return is the one you must use for SC, you have a couple of choices.

A. You can each file as Married Filing Separately (MFS) federally. Then the GA spouse would file GA full year resident separate return and the SC spouse would file a part-year separate return for SC and one for GA; each spouse with their own income/deductions. Remember if one spouse itemizes the other must also (even if one is below the standard deduction). Typically both spouses choose the standard deduction unless there are enough itemized deductions for both.

B. File as Married Filing Jointly (MFJ) federally and GA as residents and a SC non-resident (steps below). On the SC non-resident return you will be using your military status to exclude all your military pay from SC income. You would also allocate to SC only the SC spouses pay/income for the period prior to the marriage. The income taxed and the SC tax liability that will be used to claim a credit on your GA resident return.

In the GA resident return you would claim a credit for taxes paid to another state to mitigate the double taxation by your resident state (GA) on the income earned and taxed in SC.

In the "My Info" section
Indicate for both spouses that GA was the state of residence and that neither lived in another state
Be sure the military status is indicated for the active duty military spouse
Still in "My Info, scroll down to "Other State Income"
Answer "Yes" you earned income in another state and select SC
NOTE: If the military taxpayer earned income from a second job in VA or you or your spouse have income from sources other than for services performed in VA then VA will also need to be selected and a non-resident return filed there as well.
Enter all income and deductions in the federal interview
Be sure after entering the military W2 information to select "Active Military Pay" on the page asking about "Uncommon Situations". This will exclude the military pay from SC income.
Now work the SC interview
Select "Nonresident or part-year resident filing as nonresident"
Select only the spouse that lived in SC
Select "No" spouse does not qualify for Military Spouse Exclusion (This will will allow the allocation later)
Make the income allocations when asked
Complete the SC interview
Finally work the GA resident interview
Yes, GA residents all year
Continue through to arrive at a page showing the SC income and tax
Verify
Credit will be applied
Continue Ga interview

DMarkM1Answer

Assuming the SC spouse had SC taxes withheld then a part-year return will need to be filed in SC. Since SC law says whatever filing status you use on your federal return is the one you must use for SC, you have a couple of choices.

A. You can each file as Married Filing Separately (MFS) federally. Then the GA spouse would file GA full year resident separate return and the SC spouse would file a part-year separate return for SC and one for GA; each spouse with their own income/deductions. Remember if one spouse itemizes the other must also (even if one is below the standard deduction). Typically both spouses choose the standard deduction unless there are enough itemized deductions for both.

B. File as Married Filing Jointly (MFJ) federally and GA as residents and a SC non-resident (steps below). On the SC non-resident return you will be using your military status to exclude all your military pay from SC income. You would also allocate to SC only the SC spouses pay/income for the period prior to the marriage. The income taxed and the SC tax liability that will be used to claim a credit on your GA resident return.

In the GA resident return you would claim a credit for taxes paid to another state to mitigate the double taxation by your resident state (GA) on the income earned and taxed in SC.

In the "My Info" section
Indicate for both spouses that GA was the state of residence and that neither lived in another state
Be sure the military status is indicated for the active duty military spouse
Still in "My Info, scroll down to "Other State Income"
Answer "Yes" you earned income in another state and select SC
NOTE: If the military taxpayer earned income from a second job in VA or you or your spouse have income from sources other than for services performed in VA then VA will also need to be selected and a non-resident return filed there as well.
Enter all income and deductions in the federal interview
Be sure after entering the military W2 information to select "Active Military Pay" on the page asking about "Uncommon Situations". This will exclude the military pay from SC income.
Now work the SC interview
Select "Nonresident or part-year resident filing as nonresident"
Select only the spouse that lived in SC
Select "No" spouse does not qualify for Military Spouse Exclusion (This will will allow the allocation later)
Make the income allocations when asked
Complete the SC interview
Finally work the GA resident interview
Yes, GA residents all year
Continue through to arrive at a page showing the SC income and tax
Verify
Credit will be applied
Continue Ga interview

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M

mlnate1Author

Thank you for that comprehensive answer, DMarkM1. Excellent overview & instructions!

I'm inclined to go with your Option "B", with both spouses filing jointly for federal and with the both spouses filing as Georgia residents for the entire year (as well as filing a non-resident SC return to report the military spouse's SC income, with a corresponding credit taken for SC taxes incurred on the GA return).

My concern was whether it was ok to file jointly as a "full year" GA resident, even though the military spouse was married to the military taxpayer for less than the 12 months of the year.

Technically, she lived (and earned income) in SC for 3 months and in Virginia (with no income) for 9 months; however, since the military taxpayer's home of record was Georgia (and even though the military taxpayer was stationed all 12 months in Virginia), happily I can avoid filing both a part-year SC resident return and a part-year GA resident return for the military spouse who files MFS.