Military spouses may elect spouse’s state of residency with no limits


The federal Veteran’s Benefits and Transaction Act of 2018 (VBTA; P.L. 115-407) allows spouses of military service members to claim the same state of residence as the service member for state tax purposes, regardless of whether the spouse had ever resided in that state, applicable beginning with the 2018 tax year. This means that if a military couple is stationed in California but the service member has residency in a non-tax or low-tax state, the spouse may elect that non-tax or low-tax state as his or her state of residence and would not have to pay California tax on any wages earned in California.

The FTB has confirmed that this change is mandated by the VBTA because federal law preempts state law in this area.

This is a significant change to the prior Military Spouses Residency Relief Act of 2009, which only allowed a spouse to elect to share the service member spouse’s residency and avoid California tax on California wages if the spouse previously had the same domicile as the service member and moved to California to be with the service member.

Subscribe to Spidell’s California Taxletter and get more information on how the VBTA affects military couples in California. Click here for details.