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The Military Spouse Act: 5 Tax Tips for Military Spouses

Military Spouse tax deductions: If your husband or wife is a serviceman, life can be a little confusing. There’s no doubt that this nomadic lifestyle can put extra stress on the family household and everyday life.

But still, working in the military is one of the most honorable jobs in America, and so you somehow make it work. What’s more, thanks to the Military Spouse Act, doing your taxes just became a whole lot easier. Here are some tips:

1. Military Spouse Income may not be taxed

According to the Military Spouse Act, you may find that your military spouse earnings are not taxable at all. In fact, any income that is earned in the serviceman’s state under military orders won’t be taxed. You will need to know this before you begin to look into your rights and work in a new state altogether.

However, there are some limitations to this act. For one thing, if you seek to establish legal residency in the state itself, you will find that you need to start paying tax on your income just as you would need to in any other situation.

What’s more, your legal state of residence has the right to tax you on your income regardless. (So, if you’re in Virginia by military orders, but your legal residence is Arizona, the latter may still tax your income.)

2. You may be exempt from Personal Property Tax

Personal Property Tax can often be a financial sting in the tail. There are loads of types of minor taxes that these cover, such as a common vehicle registration fee. What you may not realize, though, is that if you’re residing in a state where you’re technically based (due to military orders), you could be exempt from these taxes.

It’s worth taking the time to make sure that you’re paying the right amount of tax. You will likely need to fill out a form for the state to quality for this exemption. However, it’s worth doing since it means that you will save cash that you don’t need to pay in the first place.

*Related: H&R Block for Military & OneSource

3. Open a Spousal IRA

If you’re not employed yourself and take care of the home and kids, it may be worth looking into getting a Spousal IRA account. Doing so could save you a whole load of cash when it comes to doing your taxes.

To qualify, you need to make sure that you have no earnings or employment status, i.e. that you are solely dependent on your spouse for your income. Once you’ve opened the IRA, you may be able to start earning right away.

Much like a Roth IRA, you will find that you can save up to $5,500 per year in the account. That sum will not be taxed (or will be pre-tax) which means that you will save yourself and your partner money when it comes to doing the end of year tax returns. Easy!

*Related: TurboTax: Can you state taxes for free?

4. You may not have to pay state taxes

When you move to a new state because of your spouse’s military orders, you may think that you will need to immediately start paying taxes to the governing body.

However, if your legal residence is still in your previous state (which it can be according to the act), you may not have to pay at all. You should research your rights and how things work in both your legal residence state and your current residence too.

Of course, this doesn’t mean that you will be exempt from taxes altogether. Instead, it means that you will need to pay taxes to your legal residence state. Since military spouses tend to have to move around the country a whole lot, this new legislation means that they no longer have the confusion of changing tax states each and every time.

5. Discount or Free Tax Prep for Active-Duty Military

If you or your spouse are active duty military, you should qualify for the free or discounted version of TurboTax for military / USAA. The version that you’ll use will depend on rank, but it’s a good option that can save you money during tax season.

If you find it’s not your best option, consider using the current 10-20% off discounts for TurboTax and up to 50% off H&R Block available through Mighty Taxes.