Tax Law Can Help Reduce Burden On Military Spouses

Jackson Hewitt Tax Service® Alerts Military Families About Benefits of Military Spouses Residency Relief Act

PARSIPPANY, N.J. // PRNewswire-FirstCall // -- The Military Spouses Residency Relief Act of 2009 could potentially help thousands of active duty service persons and members of the National Guard reduce the complexity of state income tax and personal property tax issues when married, stated Jackson Hewitt Tax Service®. The Company reminds military taxpayers of the Relief Act, along with other tax considerations for the men and women who serve our nation.

"The Military Spouses Residency Act passed into law last year, 2009, and is effective for this year's tax filing season," said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. "The Act was created to reduce the state and local tax burdens on military spouses who follow their partners from state to state. Thanks to this change in the law, military spouses may be eligible to claim the same domicile or resident state as their active-duty spouse with regard to state income taxes, local personal property taxes, and voting status."

Key Provision of the Military Spouses Residency Act

  • Income taxes and personal property taxes: If you are the spouse of an active duty military member and you meet the same residency requirements as your spouse, you can claim the same home state for tax purposes. If you are currently living in a state other than your home state because you follow your spouse on military orders, all of your income is taxed in your home state. In other words, if you work in the state where your spouse is stationed, you will not be taxed in that state.

For example, John, a member of the military, lives with his wife Mary in Georgia (their tax home). When John receives orders to move to New York, Mary moves with him and takes a job in the state of New York. However, for tax purposes, Mary is not required to pay taxes on the income she earns in New York, nor is Mary required to pay taxes on any of her interest or dividends earned in her investment accounts. Like John, she is taxed as if she lived and worked in Georgia because it is her home state for tax purposes. In addition, Mary will not be required to pay local personal property taxes to the New York locality on qualifying property (for example, a car) that she owns or co-owns with John.

Not related to income tax filing, but as part of the Act, a military spouse is also now considered to have the same domicile as his or her active duty spouse for voting purposes. This means that Mary no longer has to register to vote in each state she may move to in order to accompany her husband as he fulfills his orders. She is considered eligible to vote in her home state for all federal, state and local elections, though she will need to vote using an absentee ballot.

Other Military Tax Considerations

  • Earned income and combat pay: When determining taxable income, members of the military should remember that all income earned for each month while in a combat zone is considered to be combat pay and is therefore not taxable. Combat pay is reported in Box 12 (code "Q") of Form W-2, Wage and Tax Statement and not included in the wages reported in Box 1. If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion of income for that entire month. In addition, combat pay is considered earned income for purposes of the Child Tax and Additional Child Tax credits and can be considered earned income for purposes of the Earned Income Tax credit. This tax benefit can increase your refund and does not make your combat pay taxable.
  • Tax filing extensions for military: Military taxpayers who are overseas on the tax deadline day (April 15) can receive an automatic two-month extension to file their tax return, but they must pay their taxes by April 15. For service members located in a combat zone, the extension of time to file is even greater: 180 days after leaving the combat zone, plus the number of days the service member had left to take action with the IRS when entering the combat zone. Note that this deadline extension applies to the deadline for filing a tax return, paying any tax liability due, making IRA contributions, and claiming a tax refund.
  • Extension for the First-Time Homebuyer Credit: If you were on permanent orders out of the country for any 90 day period after December 31, 2008, you qualify for an extension to the time to purchase a house and qualify for the credit. You must purchase a house or be under contract to purchase the house before May 1, 2011. If you are under contract, you must close on the house before July 1, 2010.

Military taxpayers can visit Jackson Hewitt's Tax Resource Center to find more details of the provisions applicable to military status.

About Jackson Hewitt Tax Service Inc.

Jackson Hewitt Tax Service Inc. (NYSE: JTX), with more than 6,000 franchised and company-owned offices throughout the United States, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey.

SOURCE Jackson Hewitt Tax Service Inc.

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