Under the Servicemembers Civil Relief Act (SCRA), legal proceedings for individuals in active military duty must be put on hold until sometime after they are discharged. With that in mind, it is recommended that you always check for the military status of a person before filing for legal action. You can request for this information via servicememberscivilreliefact.com
Our uniformed personnel currently have access to tax benefits that are not offered to a lot of other people. This is in keeping with the SCRA so that they can “devote their entire energy to the defense needs” of the country. One of these benefits includes certain types of income that are tax-free depending on the state where the taxes are filed.
To get an idea of how your income will be taxed in your state, here’s an overview depending on income type:
1. General Military Income
There are currently several states that do offer completely tax-free military income like Arizona, Illinois, Michigan, and New Mexico. However, a lot of states still base their tax exclusions on federal tax rules; among them are California, Delaware, Georgia, and Hawaii. Some states also have their own individual notices. For example, in Connecticut, your income is tax-free if you neither own a property in the state nor visit for more than a month. For Louisiana, only military income up to $30,000 is tax-free if this is earned out-of-state for a straight 4 months or more. States like Idaho and Ohio also consider military income tax-free if the armed personnel rendered service out-of-state.
For a full breakdown of tax-free exclusions per state, you can visit: https://www.military.com/money/personal-finance/taxes/state-tax-information.html
2. Combat Income
As per the Internal Revenue Service, you can exclude combat income from taxation. They only require that you are a member of the U.S. Armed Forces and that your income must have fully accrued in a month while you are serving in a recognized combat area. This should automatically be reflected in your W-2 form.
3. Military Retirement
Currently, there are nine states that do not tax military retirement pay.
· New Hampshire
· South Dakota
Both New Hampshire and Tennessee consider retirement pay tax-free but only for dividend and interest taxes. Please note that Tennessee will be phasing out this regulation later in 2021. On the other hand, while the following states do not tax military retirement pay, they do still require the filing of personal income taxes:
· New Jersey
· New York
· North Dakota
· West Virginia
Taxes are one of those things that are almost completely unavoidable once you reach a certain age. In a nutshell, while the SCRA is able to bestow a blanket benefit on legal obligations, paying your taxes is not exactly one of them.
Armed personnel may retain their original legal residence even when they get designated out-of-state for active military service. To put their best foot forward, service members are recommended to get information from their individual state of residence regarding tax rules.