Military Spouse Tax Benefits: The MSRRA Guide

What is MSRRA?

The Military Spouses Residency Relief Act (MSRRA) is a federal law that allows military spouses to claim the same state of legal residence (domicile) as their servicemember for tax purposes—even if the spouse has never lived in that state.

This means if your servicemember's domicile is a state with no income tax (like Texas or Florida), you can avoid paying state income tax on your wages entirely, regardless of where you're actually stationed.

The 2023 VAEIA Changes (Important)

Before 2023, military spouses could only use their servicemember's domicile state if they had also previously lived in that state. This created problems for couples who met after the servicemember established domicile.

The Veterans Auto and Education Improvement Act (VAEIA), enacted January 5, 2023, removed this requirement. Now:

Source: Military OneSource - MSRRA

How Much Can You Save?

The savings depend on your income and the tax rate of the state where you're stationed versus your domicile state.

No Income Tax States

If your servicemember's domicile is one of these states, you pay zero state income tax on your wages under MSRRA:

As of January 1, 2025, New Hampshire is fully income-tax-free (previously taxed interest/dividends only).

Eligibility Requirements

To claim MSRRA benefits, you must meet all of these requirements:

1. Legally married to an active-duty servicemember
2. Present in the duty station state solely to be with your servicemember (due to military orders)
3. Your servicemember has valid domicile in the claimed state (not just a convenient choice)

What Income is Protected?

MSRRA protects your wages and salary from being taxed by the state where you're stationed. However, it does not protect:

• Income from rental property located in the duty station state
• Income from the sale of real property in the duty station state
• Income from a business physically located in that state
• Unemployment benefits from the duty station state

Source: Massachusetts TIR 19-15

How to Claim MSRRA Benefits

Step 1: Notify Your Employer

Complete your state's exemption form (varies by state) and provide it to your employer. Common forms include:

• California: Form 590 (Withholding Exemption Certificate)
• Virginia: Form VA-4 with MSRRA exemption
• Most states: State W-4 equivalent with exemption noted

Step 2: Gather Documentation

Keep these documents ready in case of audit:

• Copy of servicemember's military orders (showing duty station)
• Proof of servicemember's domicile (driver's license, voter registration, LES showing state)
• Marriage certificate
• Your own documentation showing presence is due to military orders

Step 3: File Correctly

When filing your annual tax return:

• File a resident return in your elected domicile state (if it has income tax)
• File a nonresident return in your duty station state only if you have non-exempt income there (rental property, etc.)
• Claim credit for any taxes paid to avoid double taxation

Common Mistakes to Avoid

Mistake #1: Claiming a State You Have No Connection To

MSRRA lets you use your servicemember's established domicile. It does not let either of you invent a new domicile in a convenient no-tax state. If audited, you must prove the servicemember legitimately established residency there.

Mistake #2: Forgetting to File in Your Domicile State

Just because you're exempt from duty station taxes doesn't mean you're exempt from all taxes. If your domicile state has an income tax, you must file and pay there.

Mistake #3: Not Updating When Domicile Changes

If your servicemember changes their legal domicile (many do when PCSing to no-tax states), update your employer's withholding and your filing status accordingly.