The federal Military Spouses Residency Relief Act lets spouses remain legal residents of their home state if they temporarily move elsewhere to be with their active-duty military husband or wife. During this time, their work-related income can’t be taxed by the state they are living in with their military spouse unless they are a legal resident of that state (or become one).
What if I’m stationed outside Minnesota and my spouse is living with me in that state?
If you and your spouse are both Minnesota residents:
- Your spouse’s work-related income is exempt from the other state’s income tax.
- You and your spouse must file a Minnesota tax return if your income meets the filing requirement for the year (Form M1, Individual Income Tax). Use the same filing status – joint or separate – as on your federal return.
- Your spouse’s income is subject to Minnesota tax, but you can subtract any active-duty military pay from your Minnesota income using Schedule M1M, Income Additions and Subtractions.
- Your spouse should ask their employer to stop withholding for the other state’s income tax. You and your spouse may have to make “estimated tax” payments to Minnesota. See “Estimated Tax” for details.
If the two of you are legal residents of different states, your spouse should contact the tax department of the state where you’re stationed to find out if their work-related income is exempt from that state’s tax or not.
What if I’m stationed in Minnesota and my spouse is living with me but we’re not residents?
If you’re on active military duty and stationed in Minnesota, you and your spouse are both exempt from Minnesota’s income tax if you meet all of these requirements:
- You’re in Minnesota because of your military orders.
- Your spouse is in Minnesota to be with you and didn’t move here for any other reason.
- You and your spouse are both legal residents of the same state (but not Minnesota).
Note: the Minnesota 183-day residency rule doesn’t apply to members of the military stationed in Minnesota or to their spouses.
If you meet the requirements:
- Your spouse should give their employer a properly completed Form W-4MN to prevent (or stop) Minnesota income tax from being withheld from their wages.
- To get a refund of Minnesota income tax withheld from your spouse’s wages during 2012, you must file Form M1 and Schedule M1NR (don’t include Minnesota wages in Column B). Use the same filing status – joint or separate – as on your federal return.
How might my tax credits be affected if my spouse is not a resident of Minnesota?
Most state tax credits are based on the percentage of income that is taxed by Minnesota. If your spouse’s income is exempt from Minnesota tax, the amount you receive for those credits will be lowered, and possibly reduced to zero. For more information, see the Form M1 instructions or the appropriate schedule used to claim a specific credit. (View “Credits.”)